Core & Main Inc (CNM)

History and Background

Core & Main was formed in August 2017 when Clayton, Dubilier & Rice acquired HD Supply Waterworks from Home Depot. The company provides critical infrastructure solutions to municipalities, private water companies, and contractors across the U.S. and Canada.

Core Business Areas

• Waterworks: Distribution of water, sewer, and fire protection products. This segment includes pipes, valves, fittings, hydrants, meters, and other related products used in water and wastewater infrastructure.
• Fire Protection: Offers fire protection products used in commercial and residential buildings. Includes sprinkler systems, fire hydrants, and related equipment.
• Infrastructure Products: Includes storm drainage, erosion control and high-density polyethylene (HDPE) products.

Leadership and Structure

Steve LeClair is the Chairman, President, and CEO. The company has a standard corporate structure with various departments led by senior executives, reporting to the CEO.

Key Offerings

• Competitors: Ferguson, HD Supply (now White Cap), Uponor
• Water and Sewer Pipes: A core product line essential for municipal and utility projects. Core & Main is a leading distributor but faces competition from companies such as Ferguson Enterprises and HD Supply. Accurate market share data is fragmented, however, industry estimates suggest a significant portion of the market is controlled by the top distributors. Revenue is substantial but not broken down by specific product line.
• Competitors: Mueller Water Products, Watts Water Technologies
• Valves and Fittings: Essential components in water and wastewater systems, contributing significantly to revenue. Competitors include manufacturers and other distributors. Market share data isn't disclosed at product level.
• Competitors: Ferguson, United Pipe & Steel Corp
• Fire Protection Products: Including fire hydrants and sprinkler systems; these are critical for both commercial and residential buildings.

Industry Overview

The water infrastructure industry is driven by the need to replace aging infrastructure, population growth, and increasingly stringent environmental regulations. The market is moderately fragmented, with a mix of large national distributors and smaller regional players.

Positioning

Core & Main is one of the largest distributors in the waterworks industry, with a broad geographic reach and a comprehensive product portfolio. Its competitive advantages include its scale, established relationships with suppliers and customers, and expertise in the waterworks market.

Total Addressable Market (TAM)

The TAM is estimated to be over $25 billion annually in North America, driven by infrastructure spending and maintenance. Core & Main is well-positioned to capture a significant share of this market, with ongoing expansion and strategic acquisitions.

Key Competitors

• FERG
• WTS
• URI

Competitive Landscape

Core & Main benefits from its large scale and comprehensive product portfolio, giving it a competitive advantage over smaller, regional distributors. However, it faces competition from larger players like Ferguson, which have greater financial resources and broader product offerings.

Laney Directional Drilling Co.

• Year: 2023
• Acquisition Price (USD millions): 367.5
• Strategic Rationale: Expansion of capabilities in trenchless construction and rehabilitation services, enhancing solutions for water and wastewater infrastructure projects.

Water Works Supply Co.

• Year: 2022
• Acquisition Price (USD millions): 136
• Strategic Rationale: Expanded its geographic footprint and product offerings in the Northeast region.

Historical Growth: Core & Main has experienced significant growth through organic expansion and strategic acquisitions, particularly in recent years.

Future Projections: Analyst estimates project continued revenue growth in the mid-single digits, driven by infrastructure spending and market share gains. Profitability is expected to remain strong, supported by operating efficiencies.

Recent Initiatives: Recent strategic initiatives include expansion into new markets, investment in technology and digital platforms, and acquisitions of complementary businesses.

Core & Main is a strong player in the water infrastructure market, driven by its leading market position, extensive network, and strategic acquisitions. The company benefits from robust demand for infrastructure solutions but faces risks related to economic conditions and commodity prices. Core & Main needs to capitalize on market consolidation opportunities and manage acquisition integration effectively to sustain its growth trajectory, and must watch out for changes in regulation. The company has continued to show positive YoY sales and net income.

Data Sources:

• Core & Main Investor Relations, SEC Filings (10-K, 10-Q), Analyst Reports, Market Research Reports

Disclaimers:

The information provided is for informational purposes only and does not constitute financial advice. Market share data is based on estimates and may not be precise. Investment decisions should be based on individual research and consultation with a qualified financial advisor.