Construction Partners, Inc. ROAD
ROAD is a levered Sunbelt asphalt roll-up whose Florida DOT engine is quietly stalling — FOIA shows -22% award decline — and its $1bn Lone Star deal masks the gap; we see 35-50% downside.
Thesis
Construction Partners (ROAD) is a $6bn Sunbelt asphalt and aggregates roll-up trading at the highest EBITDA multiple (17.9x) and net leverage (3.4x) in its peer group. Spruce Point's FOIA with the Florida DOT — ROAD's largest customer at ~14% of sales — shows contract awards collapsed -22% in 2024 to $215m, foreshadowing FY25 financial pressure that consensus does not model. The October 2024 ~$1bn acquisition of Lone Star Paving in Texas appears designed to deflect from this Florida gap, yet a Texas DOT FOIA reveals zero prime contracts to LSP in 24 months, suggesting it is a lower-margin subcontractor with MSHA citations at its top aggregate plant. Combined with opaque reserve disclosure, aggressive backlog definitions, declining ENR rankings, missed organic growth targets, and heavy related-party dealings, Spruce Point sees 35-50% long-term downside ($46-$60 per share).
SCQA
Construction Partners (ROAD) is a $6bn Southeast/Sunbelt asphalt-paving and aggregates roll-up with 30 acquisitions since IPO, ~61% public-sector revenue, and a record ~$2bn backlog earning a premium peer-group valuation.
FOIA data shows Florida DOT contract awards — its single biggest customer at 14% of sales — fell -22% in 2024, while the $1bn Lone Star Paving deal in Texas appears to mask the gap and lacks prime-contract evidence in the Texas DOT FOIA.
Investors should reprice ROAD against materials and heavy-contractor peers given opaque aggregate reserves, aggressive backlog definitions, 3.4x net leverage, missed organic growth targets, and pervasive related-party dealings — not pay a premium multiple.
Spruce Point models 35-50% long-term downside, with a base case of $55-$64 per share versus the ~$93 stock price, and a low case of $40-$49 implying up to 57% downside.
The three reasons
- 1
Florida DOT awards (14% of sales) fell -22% in 2024 per Spruce Point FOIA
- 2
Lone Star Paving acquisition deflects from Florida; FOIA shows zero Texas DOT prime contracts
- 3
Premium 17.9x EBITDA multiple unjustified at 3.4x net leverage with opaque reserves
Primary demands
- Investors should reassess ROAD's premium valuation in light of FOIA evidence of declining Florida DOT contract awards
- Discount ROAD's roll-up acquisitions (Lone Star Paving, Overland) for weak backlog quality and subcontractor dependence
- Demand quantitative disclosure of proven and probable aggregate reserves
- Scrutinize aggressive backlog definition, high DSOs, and revenue recognition changes
- Question governance: dual-class structure, related-party dealings, and insider selling
KPIs cited
Pattern membership
Precedents cited
- U.S. Concrete (USCR) — Spruce Point's prior construction-materials roll-up short (5/7/2018)
Composition what's on the 70 slides
Slide gallery ·
Notes
Spruce Point 'Strong Sell' short report on Construction Partners (ROAD). Distinctive cover art (alligator + steamroller). Document is firm-authored — no individual signature; Ben Axler is firm founder but not credited on cover. Heavy use of FOIA primary research (Florida DOT and Texas DOT) is the rhetorical centerpiece. Argues by analogy to Spruce Point's own prior USCR short (2018). Multiple CEO/Chairman quote-contradiction slides (p.10, p.38). Strong before/after framing on management's evolving market-share language (p.9), ENR ranking disappearance (p.12-13), and reserve-disclosure changes (p.27). Valuation framework is peer multiple comparison, not sum-of-parts. Visual quality is solid institutional Spruce Point template — readable, branded, dense — but not editorial-tier; notable cover image is unusually creative for the genre.