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Is Vulcan (VMC) Poised to Beat Earnings Estimates in Q2?

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Vulcan Materials Company (VMC - Free Report) is scheduled to release second-quarter 2020 results on Aug 4, before the opening bell.

In the last reported quarter, the company’s adjusted earnings and revenues topped the Zacks Consensus Estimate by 14.6% and 4.1%, respectively. On a year-over-year basis, earnings and revenues improved 2.2% and 5.3%, respectively.

Vulcan’s earnings topped the consensus mark in two of the last four quarters and missed on the other two occasions, with the average surprise being 3%.

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings per share has been upwardly revised by 3% over the past seven days to $1.38. This indicates a decrease of 6.8% from the year-ago quarter. The consensus estimate for revenues is pegged at $1.31 billion, suggesting a 1.4% year-over-year decline.

Vulcan Materials Company Price and EPS Surprise

Vulcan Materials Company Price and EPS Surprise

Vulcan Materials Company price-eps-surprise | Vulcan Materials Company Quote

Factors to Note

Vulcan is expected to have generated lower earnings and revenues on a year-over-year basis in the second quarter, given strong first-half 2020 comparisons and reduced state DOT spending. Its business and earnings are sensitive to changes in construction spending, particularly housing and public construction in the Southeast, Texas, and California.

Notably, publicly-funded construction accounts for significant part (approximately 45-55%) of Vulcan’s total aggregate shipments. The Aggregates business (including crushed stone, sand and gravel, and sand and other aggregates) has been a major contributor to revenue growth. The slowing of highway contract awards, difficult comparisons, uncertainty around state DOTs funding and soft non-residential housing activity are expected to have weighed on its second-quarter earnings. Again, higher repair and maintenance costs might have added to the woes.

Also, wet weather in some parts of its geographies may get reflected in the quarterly results.

Nonetheless, efforts to enhance operational excellence, acquisition synergies and cost-control measures are expected to have aided the bottom line to some extent. Furthermore, heavy material producers are expected to have benefited from negligible project cancellations amid the COVID-19 pandemic, as most construction was deemed essential during the state-directed shutdowns.

Key Projections

The Zacks Consensus Estimate for Aggregates segment sales is pegged at $1,050 million, suggesting a decrease of 1.1% from a year ago but 21% sequential increase. For the Asphalt Mix segment, the consensus estimate for sales is pegged $240 million, which implies a 2.8% year-over-year decline but 71.4% sequential growth. The consensus mark for Concrete segment revenues is pegged at $101 million, implying a 2.9% year-over-year decline but 6.3% sequential growth. The same for Calcium segment revenues is $2 million, pointing to no change on a year-over-year basis but a decline from $2.03 million in the first quarter.

Quantitative Model Prediction

Our proven model predicts an earnings beat for Vulcan this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is exactly the case here as you will see below.

Earnings ESP: Its Earnings ESP is +2.55%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Vulcan currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks Worth a Look

Here are some other companies in the Zacks Construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.

TopBuild Corp. (BLD - Free Report) has an Earnings ESP of +29.11% and holds a Zacks Rank #1.

Foundation Building Materials, Inc. (FBM - Free Report) has an Earnings ESP of +28.57% and carries a Zacks Rank #3.

KBR, Inc. (KBR - Free Report) has an Earnings ESP of +11.11% and carries a Zacks Rank #3.

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