Vulcan Materials Company (VMC - Analyst Report) is set to report second-quarter 2014 results on Aug 5, before the opening bell. Last quarter, the company delivered a positive earnings surprise of 17.65%.
In fact, this construction aggregates producer posted positive earnings surprise in three of the past four quarters with an average beat of 92.96% due to a rebound in its aggregates business.
Let’s see how things are shaping up for this announcement.
Factors to Consider This Quarter
After witnessing a sharp increase in aggregates demand in the second half of 2013, difficult weather conditions slowed down volume trends for the company in the first quarter of 2014.
Moreover, disruptions in production and shipping days led to increased costs which, coupled with unfavorable geographic mix, weighed on margins.
However, management expects volumes to pick up in the second quarter. Management expects to recover the first-quarter shipment delays in the second quarter as the construction season sets in.
Overall, management has an optimistic outlook for the second half. Management expects aggregates volume to increase 4–7% in 2014 and aggregates prices to increase 3–5%. Private construction is expected to continue to lead volume growth in 2014.
Additionally, large projects, including both public infrastructure and private industrial projects are expected to contribute modestly to volume growth. Vulcan Materials expects aggregates segment margins to improve further in the second half driven by volume and pricing growth as well as solid cost control and operating efficiencies from profit enhancement initiatives.
However, limited visibility on aggregates demand growth in public construction and uncertainty surrounding September expiration of the current highway bill are the overhangs.
Our proven model does not conclusively show that Vulcan Materials is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.
Zacks ESP: The Earnings ESP is 0.00%.
Zacks Rank: Vulcan Materials’ Zacks Rank #3 (Hold) when combined with a 0.00% ESP, makes surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Other stocks in building/construction sector that have both a positive Earnings ESP and a favorable Zacks Rank are:
United Rentals, Inc. (URI - Snapshot Report),with an Earnings ESP of 2.38% and a Zacks Rank #2 (Buy).
CEMEX, S.A.B. de C.V. (CX - Snapshot Report), with an Earnings ESP of +100.0% and a Zacks Rank #3 (Hold).
Masco Corp. (MAS - Analyst Report), with an Earnings ESP of +3.13% and a Zacks Rank #3.