So far, 2023 has been a turbulent year for many FTSE 100 stocks. But building materials supplier CRH (LSE:CRH) has had no such problems, and its share price has risen 38% since the start of the year. It is currently trading at record peaks around £45.80 per share.
I’m a big fan of the company myself. In fact I bought it for my Stocks and Shares ISA back in 2021. It is currently the fifth-largest holding in my investment portfolio.
City analysts are also positive on the company’s investment prospects. Of the 21 brokers with ratings on the company, 19 rate it as a ‘buy.’ One has ranked it as a ‘hold’ while another has slapped a ‘sell’ on it, according to stock screener Trading View.
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The broad view among analysts is that the CRH share price will rise another 10.4% over the next year, bursting through £50 per share.
Of course brokers don’t always get it right. Signs of a prolonged downturn in the global economy could derail mine and the City’s bullish view. But here is why I think the business remains a top buy right now.
Industry giant
CRH is one of the world’s largest suppliers of products to the construction industry. These include basic materials like cement, asphalt, lime, and aggregates. It also manufactures architectural, infrastructure, and utilities products that make the building process easier and more time-efficient for companies.
The FTSE company does this across a wide geographic footprint. A long-running commitment to growing through acquisitions means it has operations in almost 30 countries across North America, Europe, and Asia.
CRH’s colossal scale gives it obvious advantages. It sources 75% of profits from North America. But its broad territorial footprint reduces risk. If trading conditions worsen in one or two regions the impact on the bottom line can be reduced.
It also gives the company the chance to exploit significant regional opportunities. Rapid urbanisation in emerging markets should boost long-term demand for its products. So should large programmes of infrastructure upgrades in the US and Europe.
Too cheap to miss
CRH has proven that it has what it takes to lead in these marketplaces. In fact it continues to perform strongly even as conditions in its end markets cool.
Sales rose 22% in the first quarter thanks to what it said was “good pricing progress, resilient underlying demand, the positive contribution from prior year acquisitions and the continued delivery of our integrated solutions strategy”.
The company’s excellent cash generation gives it further room to keep growing revenues through acquisitions. CRH has spent €200m to pick up four businesses in the year to date. It also means the company should also keep returning lots of cash to its investors (it’s currently in the middle of a €3bn share repurchase programme).
The CRH share price currently trades on a forward price-to-earnings (P/E) ratio of 14.2 times. This is just ahead of an average of 14 times for FTSE 100 shares. And I think this represents excellent value given its exceptional profits outlook.
