Valmont Reorganizes, Guides High

Valmont Industries, Inc. (VMI - Analyst Report) announced that it will record a one-time earnings benefit of about $2.66 a share in the fourth quarter after the company reorganized its Delta business to take advantage of losses it can write off from taxes.

The company also raised its full-year earnings guidance, indicating that profit will modestly exceed its previously forecast range of $5.70 to $5.90 per share due to stronger performance in all its main business segments. Valmont had previously forecast earnings at the middle to low end based on economic uncertainty in Europe.

Valmont announced that it has reduced its tax burden by legally merging its Delta businesses in the U.S. with the parent company while organizing Delta's Asia Pacific entities directly under Valmont's Australian business. The simplified structure will allow the company to recognize certain tax-losses from the company it acquired in 2010.

As per the company, the move will save about $4.3 million in cash a year for the next 12 years, though the company does not expect any significant change to its tax rate going forward, offset by the deferred tax expenses.

Most of the new one-time gain came from a $2.70 per share benefit from the value of the newly recognized tax loss carry-forwards, as well as from higher income tax basis on Valmont's Australian assets.

According to Valmont, a separate insurance settlement for fire and storm damage at an Australian galvanizing facility will boost fourth-quarter earnings by about 9 cents a share.

At the same time, the company slashed the carrying value of some trade names, adding a charge of 9 cents per share to the fourth quarter. Valmont also reorganized its pole operations in Europe to reduce overhead costs, prompting a charge of 4 cents a share for the fourth quarter.

Recently, the company posted its third-quarter 2011 net earnings of $1.59 per share, an increase of 62% from last years’ $0.98.

Quarterly revenues, however, jumped 27.4% year over year to $672.2 million. The third- quarter results were driven by a significant growth in Irrigation Segment sales, increased revenue in every segment and strong market fundamentals.

Currently, Valmont has short-term (1 to 3 months) Zacks #3 Hold rating and a long-term (6 months) Neutral recommendation.

The company faces stiff competition from Lindsay Corporation (LNN - Analyst Report) and Thomas and Betts Corp. (TNB).

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