Shares in CRH soared to a nine-year high on Wednesday, trading on speculation the building materials group is on the cusp of joining Europe's most influential stock market index.
The Dublin-based company's shares rose as much at 4.3 per cent to €30.32 on the Irish Stock Exchange, though it ended the session up 0.9 per cent. The largest company on the Iseq managed to keep the Irish market in positive territory as the FTSE 100 and wider European market declined.
Robert Eason, an analyst with Goodbody Stockbrokers, said market chatter that CRH is poised to join the Euro Stoxx 50 has prompted funds that track the key index to acquire stock in the Irish company so as not to be caught off-guard.
“I think it is placed around 40th [in terms of market capitalisation among eligible companies] at the moment, so it’s well in there,” he said.
The components of the Euro Stoxx 50, which currently contains no Irish companies, will be decided on market data at the end of the month. The greater extent to which investors are buying into the speculation of CRH joining the index, the greater the chance of it becoming self-fulfilling.
CRH, which currently has a €24.3 billion market capitalisation, was relegated from the Euro Stoxx 50 index two years ago in favour of Nokia, the Finnish communications and information technology group.
Adidas, the German sportswear giant which is valued at €32.6 billion, and Belgo-Dutch supermarket group Ahold Delhaize,at €27.4 billion, are all but guaranteed to gain positions on the index in two weeks time, unless they fall dramatically, according to market sources.
"The markets now seem to believe that CRH is going to make it as well," said David Donnelly, a senior investment analyst with Cantor Fitzgerald in Dublin.
CRH’s strong market run of late was initially prompted by the group’s move late last month to raise its first-half earnings guidance by 10 per cent. The company said on July 22nd it now expected to report earnings of €1.1 billion before interest, tax, depreciation and amortisation.
"Recent numbers from peers such as HeidelbergCement and LafargeHolcim have also been quite strong," said Mr Donnelly.
CRH’s interim results are scheduled for release on August 25th.
Analysts, on average, forecast that CRH will post a record €3.1 billion of earnings before interest, tax, depreciation and amortisation for the full year as it continues to benefit from its transformational €6.4 billion purchase in 2015 of assets off-loaded by Lafarge and Holcim, in order to appease competition authorities as part of their merger.