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Vulcan (VMC) Up 6.7% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Vulcan Materials (VMC - Free Report) . Shares have added about 6.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Vulcan due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Vulcan Materials’ Q3 Earnings & Revenues Beat Estimates

Vulcan Materials Company reported third-quarter 2018 results, wherein earnings and revenues topped the Zacks Consensus Estimate and also improved year over year, given above-average increase in demand in the markets served by the company.

The nation's largest producer of construction aggregates reported adjusted earnings of $1.40 per share in the third quarter, surpassing the consensus mark of $1.36. The bottom line also increased about 34.6% on a year-over-year basis.

Moreover, total revenues of $1.24 billion outpaced the consensus mark of $1.22 billion. The top line also increased 13% from the prior-year quarter.

Segments in Detail

Aggregates

Revenues increased 14.6% year over year to $983.7 million. Freight-adjusted revenues rose 21.9% from a year ago to $221 million in the quarter.

Aggregate shipments (volumes) were up 10% year over year (6% on a same-store basis), reflecting solid underlying demand, except in a few markets that were impacted by severe weather. Many of the company's markets (North Carolina and Virginia) were impacted by Hurricane Florence, along with extremely wet weather in September (in most Texas markets).

Despite weather-related woes in key markets and a 28% increase in diesel cost per gallon, Aggregates segment’s gross profit amounted to $304 million, up 18% year over year.

Non-Aggregates

Revenues in the Asphalt Mix segment were $231.7 million, up 22% from the prior-year quarter. Asphalt segment gross profit was $24 million, down $7 million from a year ago due to lower material margins. Asphalt mix selling prices increased 8% or $4.07 per ton from a year ago. However, a 29% increase in unit cost of liquid asphalt more than offset the price improvement.

Total revenues in the Concrete segment were $101.7 million, down 11.9% year over year. Gross profit was $14.6 million, up 3.2% year over year. Same-store shipments were down 7% year over year due to wet weather in the company's Virginia markets.

Total revenues in the Calcium segment were $1.9 million, down 2.7% from the prior-year quarter. The segment reported gross profit of $0.9 million versus $0.7 million in the prior-year quarter.

Operating Highlights

Adjusted EBITDA was up 13% year over year to $353 million.

Selling, Administrative and General expenses were $82 million, up $8 million year over year due to acquired operations and the timing of certain accruals.

Financials

As of Sep 30, 2018, cash and cash equivalents were $38 million, down from $141.6 million at the end of 2017.

2018 Guidance Trimmed

The company expects strong aggregates shipment growth through the rest of the year.

Its earnings for the full year from continuing operations are expected within $3.85-$3.95 (versus prior expectation of $4.00-$4.65 per share) and adjusted EBITDA is projected in the range of $1.125-$1.135 (compared with $1.15-$1.25 billion estimated earlier). The trimmed expectation mainly reflects the impact of aggregates shipments that were deferred due to weather. Meanwhile, full-year Asphalt segment gross profit is expected to be $25 million lower than the prior year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -8% due to these changes.

VGM Scores

Currently, Vulcan has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Vulcan has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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