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Bear of the Day: Vulcan Materials (VMC)

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Vulcan Materials (VMC - Free Report) is a construction sector stock I've been talking and writing about -- and trading -- for many years since I grew up in a rural county that was rich in gravel and they were the primary excavator of aggregate for roads and cement.

Growing up in Crystal Lake, Illinois, we swam and fished in the "gravel pits" that other states might call a quarry.

While shares have soared 10% in the past 7 trading sessions -- even surging on the first day of 2018 to a new 6-month high -- analysts continue to lower earnings estimates, keeping VMC in the cellar of the Zacks Rank.

To give you an idea of the EPS slide, over two months ago the consensus for 2018 earnings slipped from $4.72 to $4.19.

While that estimate drop was clearly absorbed in a strong economy expecting government infrastructure stimulus at some point, in the past 30 days, the Zacks consensus dropped again from $4.08 to $3.99, pushing VMC back down to a Zacks #5 Rank Strong Sell.

Clearly, the analysts see something that is less optimistic about the business and they continue to grow softer on the outlook.

And trading over 32 times that forward EPS estimate -- as if it were a Tech stock -- shares may have trouble getting over the big weekly resistance level around $135.

Digging for the Aggregate Picture

One of the best ways to see the "aggregate" views of Wall Street for Vulcan over time is the proprietary Zacks Price & Consensus chart.

What you see below are the changes in the annual EPS estimate consensus...



Vulcan may have an earnings turn-around in 2018, but right now we have no evidence of that coming down the pike. Estimates seem to always start out overly optimistic and then get lowered as the quarters pass and reality sets in.

And maybe a federal infrastructure bill is already priced-in. We have no reason to believe otherwise given analyst sentiment.

Until we have more evidence, best to stay on the side of the road with Vulcan.

The Zacks Rank will let you know when the potholes are getting repaired in the VMC outlook.

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