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We are maintaining our Outperform recommendation on Valmont Industries (VMI - Analyst Report) following its strong second-quarter 2012 results. Earnings of $2.24 per share topped the Zacks Consensus Estimate of $2.16. Profit jumped 31% year over year on healthy revenue growth.

Revenues shot up 14.8% year over year to $767.3 million, exceeding the Zacks Consensus Estimate of $764 million. The results were boosted by a solid performance in the Nebraska-based company’s Utility Support Structures division. Revenues from the segment cruised 55% year over year, buoyed by higher demand from electric utility companies.

Valmont envisions the environment to remain favorable for the Irrigation and Coatings segments. The company expects to post double-digit earnings growth in 2012 despite the European slowdown.

Valmont, which competes with Lindsay Corporation (LNN - Analyst Report), makes fabricated metal products, metal and concrete pole and tower structures and mechanized irrigation systems in the U.S. and abroad.  The company is witnessing significant strength in the irrigation market. The outlook for irrigation equipment is healthy while demand for Utility Support Structures is expected to rise. Healthy order activity and a growing backlog support expectations for a strong 2012.

Valmont’s Irrigation and Coatings segments are witnessing strong momentum recently. In the Irrigation segment, improving North American equipment demand amid the ongoing drought conditions is boosting sales and profitability.

The Coatings segment is benefiting from declining energy costs. The company is also poised to savor incremental opportunity in the utility market. The global transmission and distribution markets are seen as major long-term growth opportunities. Acquisitions will also support growth in 2012.

Valmont is increasing capacity to leverage the meaningful opportunity in the North American utility market. Moreover, it remains committed to returning value to its shareholders in the form of regular dividend payouts.

However, the company’s core Engineered Infrastructure Products segment remains challenged by the soft market conditions in Europe. Nevertheless, the passage of a two year highway bill and improvement across the wireless communications and commercial lighting markets represents positives for this business.  

Our recommendation on the stock is in agreement with a short-term Zacks #2 Rank (Buy).

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