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Aggressive Growth

Valmont Industries (VMI - Analyst Report) is a Zacks #1 Rank (Strong Buy) following six straight positive earnings surprises and higher earnings estimates.

Company Description

Valmont Industries produces and sells fabricated metal products, pole and tower structures, and mechanized irrigation systems in the United States and internationally. The company's Engineered Infrastructure Products segment offers steel and aluminum poles and structures, to which lighting and traffic control fixtures are attached for applications in streets, highways, parking lots, sports stadiums, and commercial and residential developments; and roadway safety systems, including guard rail barrier systems, wire rope safety barriers, and crash attenuation barriers to redirect vehicles and to prevent collisions between vehicles. Valmont Industries, Inc. was founded in 1946 and is headquartered in Omaha, Nebraska.

Valmont Industries Beats Expectations for Six Straight Quarters

Valmont Industries has topped the Zacks Consensus Estimate in each of the last six quarters. Over the course of the last six reports, The company has produced some large beats in both percentage and absolute terms. A $0.16 average beat over the last six quarters is fairly impressive, and even more so when that translates into a 11.2% positive earnings surprise. On average, the beats have produced a stock price move of 4.1% following the earnings release. The biggest price move came after the December 2010 quarter was reported in mid-February of 2011. The 16% bottom line surprise was good for a 14.5% move in the stock.

It’s not just earnings that are beating the Zacks Consensus Estimate, its revenues too. The revenue streak is even longer than the earnings streak, but over the last six quarters the company has topped expectations by an average of nearly 8%. The December 2010 quarter which was the biggest earnings beat was also the largest topline surprise as well, coming in 13% above the Zacks Consensus Estimate.

Valmont Industries Recently Reported Earnings

On April 19, 2012 the company reported revenue of $717 million approximately $43 million more than the Zacks Consensus Estimate and higher than the $568 million reported in the year ago period. EPS of $1.96 was $0.40 higher than the Zacks Consensus estimates and a penny short of a dollar ahead of EPS from the prior year. Following the report, the stock moved higher by 4%.

Earnings Estimates Move Higher

Following the most recent earnings release, analysts have bumped up their estimate for 2012. Prior to the release, analysts were expecting EPS of $7.42 for Valmont Industries in 2012. The current Zacks Consensus Estimate is calling for $8.00 a share in EPS, indicating that the $0.40 beat was not a one-time event (that would have resulted in the consensus moving up $0.40 or less and instead was higher by $0.58).

Valuations

Valmont Industries' valuation is worthy of a look from not only aggressive growth investors, but value investors as well. A trailing PE of 18x is just a point below the industry average of 19x while the forward PE of 16x is a significant premium to the 6x industry average. Price to book of 2.6x is roughly three times lower than the industry average of 6.3x and price to sales of 1.2x is many multiples below the industry average of 5.9x. Overall, the valuation is very attractive.

The Chart

When we look at the price and consensus chart for Valmont Industries, we see a stock that has followed the earnings estimates for most of the last two years. The significant rise in stock price over the last seven months has also been reflected in the earnings estimates. What I like about this chart is the it shows how the growth rate of earnings has really really driven the stock. The gaps between the blue line (2011 consensus) the red line (2012 consensus) and the pink line (2013) are a visual reminder that higher earnings bring higher stock prices, and earnings are poised to go higher. Valmont Industries is a Zacks #1 Rank (Strong Buy).

Valmont Industries - ticker VMI>
 
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Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service You can follow him at twitter.com/bbolan1

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