On August 31, Construction Partners (NASDAQ:ROAD) closed its purchase of Asphalt Express Enterprises, a liquid asphalt supply and hauling business based in Ardmore, Oklahoma. The deal handed the company a rail-served industrial site that it plans to eventually turn into a full liquid asphalt terminal serving Oklahoma and northern Texas. It’s a small transaction in dollar terms, but it captures how this Sunbelt paving roll-up tends to operate: secure the raw material supply chain before you strictly need it, and let today’s trucking business help fund tomorrow’s terminal.
Building The Supply Chain It Needs
The Asphalt Express deal adds a fleet of trucks and trailers already moving liquid asphalt across Oklahoma and north Texas, along with the Ardmore site where that supply currently arrives by rail. Construction Partners has said it wants the location to eventually house its own terminal, which would let the company control a raw material its hot-mix plants depend on rather than buying it through someone else.
That’s the same instinct behind its purchase of Ellsworth Construction weeks earlier, a deal that pushed further into the fast-growing Tulsa and Oklahoma City metro areas and added data center construction capabilities that complement its existing Overland platform in North Texas. The underlying business gives that strategy room to work. Revenue reached $999.4 million in the fiscal third quarter, up 28.2% from $779.3 million a year earlier, while adjusted EBITDA climbed 23.8% to $163.0 million. Net income rose to $59.6 million from $44.0 million, and adjusted earnings per diluted share reached $1.08, up from $0.81. G&A costs grew in dollar terms but fell as a share of revenue, to 6.3% from 6.5%, a sign of efficiency gains as the company scales.
Backlog hit a record $3.36 billion at the end of June, up from $2.94 billion a year earlier and $3.14 billion just three months before, giving management enough visibility to raise its full-year revenue outlook to $3.640 billion to $3.680 billion. Executive Chairman Ned Fleming described the approach plainly: pair organic growth with acquisitions that add scale and efficiency, funded by what he called a strong balance sheet.
Weather And Costs Still Bite
The quarter wasn’t without friction. Management said energy cost inflation and extremely wet weather across many of its markets in May weighed on results even as revenue climbed 28.2%. General and administrative expenses also grew in dollar terms, from $51.0 million to $63.1 million, even as they shrank slightly as a share of revenue. Those are costs a paving and asphalt business can’t fully control. Energy prices and weather move on their own schedule, and they’re a reminder that outsized growth doesn’t erase everyday cost pressure.
What The Smart Money Sees
Hedge fund ownership climbed from 22 funds to 27 in the most recent quarter, pointing to institutions adding rather than trimming their stakes. Short interest sits at 7.25% of the float, a real but not extreme level of skepticism. Construction Partners trades at a forward price-to-earnings ratio of 26.32 as of September 4, a multiple that assumes the growth investors just saw in the third quarter keeps showing up. Rising fund ownership alongside a still-meaningful short position suggests the market hasn’t fully settled on how much of that growth is already priced in.
A Small Deal With Bigger Implications
Construction Partners keeps adding small, deliberate pieces, an asphalt hauler here, a construction platform there, to a Sunbelt paving business already growing revenue and backlog at a rapid clip. The Asphalt Express deal is tiny next to a $3.36 billion backlog, but it fits a pattern of buying the inputs a roll-up eventually needs instead of renting them. If the raised guidance holds despite energy costs and unpredictable weather, this quiet accumulation of supply chain assets looks smart in hindsight.
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