Derek Podhaizer, an analyst from Barclays, maintained the Buy rating on US Silica Holdings (SLCA – Research Report). The associated price target is $15.00.
Derek Podhaizer has given his Buy rating due to a combination of factors that signal robust growth potential for US Silica Holdings (SLCA). One key aspect of this optimism is the company’s Industrial & Specialty Products (ISP) division, which has been somewhat overshadowed by the Oil & Gas segment in investor discussions. However, Podhaizer acknowledges that the ISP division is on track to significantly expand its total addressable market (TAM), aiming to double it from $3 billion to over $6 billion by 2026. This expansion is expected to drive a compound annual growth rate (CAGR) of 8-10% in contribution margins, alongside a 200 basis point improvement in margins, which surpasses current market expectations for the company’s 2024 EBITDA.
The report also highlights the diversity and resilience of the ISP division, with a balanced revenue mix across various end segments, and a notable 20% of sales originating outside the U.S. The structure of the ISP’s offerings is another strength, with products that are integral to manufacturing processes, add critical value to customer products, or serve as major components in finished goods like solar panels and eyeglasses. Additionally, the company benefits from stable revenue streams, with half of ISP revenues tied to long-term contracts that include fixed pricing with escalators and minimum volume commitments from customers. These factors collectively form the basis for Podhaizer’s positive outlook on SLCA’s stock.
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US Silica Holdings (SLCA) Company Description:
U.S. Silica Holdings, Inc. engages in the provision of commercial silica products. It operates through Oil and Gas Proppants; and Industrial and Specialty Products segments. The Oil and Gas Proppants segment focuses in delivering fracturing sand, which is pumped down oil and natural gas wells to prop open rock fissures and increase the flow rate of natural gas and oil from the wells. The Industrial and Specialty products segment consists of products and materials used in a variety of industries including, container glass, fiberglass, specialty glass, flat glass, building products, fillers and extenders, foundry products, chemicals, recreation products, and filtration products. The company was founded on November 14, 2008 and is headquartered in Katy, TX.
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