Advanced Drainage Systems (NYSE:WMS) reported fourth-quarter results ahead of analyst expectations, although shares fell 3.4% after management struck a cautious tone regarding future demand conditions.
The water infrastructure and drainage products group posted adjusted earnings per share of US$1.07 for the quarter ended March 31, beating analyst forecasts of US$0.95 by US$0.12.
Quarterly revenue increased 9.9% year-on-year to US$676.8 million, ahead of analyst expectations of US$652.07 million.
Organic sales growth reached 2.0% during the quarter.
The company said revenue growth was supported by strong demand for Allied products as well as the contribution from its acquisition of NDS, which closed during the quarter.
For fiscal 2027, Advanced Drainage Systems forecast revenue of between US$3.35 billion and US$3.55 billion.
The midpoint of the guidance range, US$3.45 billion, stands roughly 14% above the analyst consensus estimate of US$3.03 billion.
Despite the strong guidance, management warned that the broader demand environment remains uncertain due to geopolitical risks, elevated interest rates and wider economic pressures.
The company noted that while large non-residential construction projects continue to support activity, residential construction markets have weakened.
“In the fourth quarter, net sales increased 10% overall, driven by strong growth in Allied products as well as the contribution from the NDS acquisition, which we closed in the quarter,” said Scott Barbour, President and Chief Executive Officer.
For fiscal 2026, net sales rose 5% as the company continued executing its growth strategy focused on material conversion, product innovation and acquisitions.
Higher-margin product categories continued to perform strongly, with Infiltrator products growing 14% and Allied products increasing 13% during the year.
Together, those categories represented 48% of total fiscal 2026 revenue.
The company also reported an adjusted EBITDA margin of 31.6% for the fiscal year.
Advanced Drainage Systems generated US$819.1 million in operating cash flow during fiscal 2026 and returned US$155.4 million to shareholders.