Valmont Upgraded to Outperform

We are upgrading our recommendation on Valmont Industries (VMI - Analyst Report) to Outperform from Neutral. The company is primarily engaged in the production of fabricated metal products, metal and concrete pole and tower structures and mechanized irrigation systems in the U.S. and abroad.  

Valmont Industries reported strong third-quarter 2011 net earnings of $1.59 per share, up 62% year over year. Revenues jumped 27.4% to $672.2 million, driven by a significant growth in Irrigation Segment sales, increased revenue in every segment and strong market fundamentals.

We believe acquisitions will spur growth moving forward. Valmont acquired Delta plc., a manufacturer of support structures for the lighting, wireless and utility industry, as well as industrial access systems and road safety systems in the U.K. In addition to the U.S., the company has operations in major growth economies like Australia, New Zealand, China, South Africa and Southeast Asia. Delta’s engineered support structures business and galvanizing facilities add size and geographic coverage to Valmont’s current businesses. The business accounts for about 15% of total revenue. Valmont believes that Delta's access systems and road safety businesses will bring new growth platforms. With leadership position in the fast growing Asian markets and in Australia's strong resource driven economy, Delta should strengthen Valmont's base.

In accordance with its acquisition spree, Valmont acquired the remaining 40% of Donhad during the second quarter of 2011. Donhad is an Australian grinding media business serving the mining industry with annual revenues of approximately $160.0 million.

Currently, the company is witnessing significant strength in the irrigation market, an improving demand for utility transmission structure and expectations for better operational performance in the Engineered Infrastructure Products segment.

Going forward, the outlook also remains positive while demand for Utility Support Structures is on the rise. Recent order activity and a growing backlog support its expectations for a strong fourth quarter and 2012.

Currently, Valmont has short-term (1 to 3 months) Zacks #1 Rank (Strong Buy) and a long-term (6 months) Outperform recommendation.

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

Read the full analyst report on VMI

Read the full analyst report on LNN

Read the full analyst report on TNB