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Vulcan (VMC) Down 0.9% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Vulcan Materials (VMC - Free Report) . Shares have lost about 0.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Vulcan due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Vulcan Materials (VMC - Free Report) Q2 Earnings & Revenues Beat Estimates

Vulcan Materials Company reported impressive results for second-quarter 2020. Both the top and bottom lines surpassed the Zacks Consensus Estimate backed by solid operational execution despite some disruptions in construction activity during the quarter.

Inside the Headlines

Vulcan Materials — which is one of the largest producers of construction aggregates — reported adjusted earnings of $1.60 per share, which surpassed the consensus mark of $1.38 by 15.9%. Also, the company’s bottom line improved 8.1% from the year-ago level on the back of prudent cost-control efforts and higher pricing in aggregates.

Total revenues of $1,322.6 million topped the consensus mark by 1% but decreased 0.4% year over year.

Segments in Detail

Aggregates

Revenues from the segment increased 1% year over year to $1,070.6 million owing to higher pricing, partly offset by lower shipments.

Aggregate shipments (volumes) were down 2% year over year as shipping patterns varied widely across the company's footprint as a result of economic uncertainty. Also, wet weather added to the woes.

During the quarter, freight-adjusted average sales price increased 3% from the prior-year quarter. Freight-adjusted revenues also rose 1% from the prior-year quarter to $814.7 million.

By end market, residential has been the most resilient (notably Texas). Nonresidential has been noticeable with data center and warehousing outperforming office and retail. In public/highways, bidding activity remains strong in Texas, Tennessee, Virginia, and California, while the Carolinas remain pressured due to budget shortfalls.

Gross profit of $351.2 million was up 6.7% year over year, backed by widespread growth in pricing and effective cost control. Gross margin — as a percentage of segment sales — improved 220 bps to 42.3% (excluding freight & delivery).

Asphalt, Concrete and Calcium

Revenues from the Asphalt segment were $223 million, up 9.8% year over year. The segment recorded gross profit of $30.5 million, up 10.4% from the year-ago quarter. Although asphalt volumes for the quarter declined 5% from a year ago, it captured the benefits from lower liquid asphalt costs.    

Total revenues from the Concrete segment were $100.7 million, down 3% year over year. However, gross profit totaled $14.2 million, up 10.4% year over year. Shipments were down 4% year over year. Average selling prices grew 1% year over year.

Total revenues from the Calcium segment were down 5.7% from the prior-year figure to $1.9 million. The segment reported gross profit of $0.7 million, down 18.5% from the prior-year quarter.

Operating Highlights

Selling, Administrative and General or SAG expenses — as a percentage of total revenues — improved 31 bps for the quarter. The improvement was mainly driven by cost-reduction initiatives, lower incentive compensation costs and general cost control in response to the COVID-19 pandemic. Adjusted EBIT grew 10.7% from the prior-year quarter to $308.3 million. Adjusted EBITDA was also up 9.6% year over year to $407.8 million.

Financials

As of Jun 30, 2020, cash and cash equivalents were $816.8 million, up from $26 million in the comparable year-ago period and $271.6 million at 2019-end. Long-term debt was $2.79 billion, slightly up from the year-ago quarter and 2019-end.

During the quarter, Vulcan Materials returned $45 million to shareholders through dividends, reflecting a 10% increase from the prior year. However, it did not repurchase any shares in the quarter.

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Despite the fact that the economic environment is showing signs of improvement, the pandemic’s effect on demand and the broader economy remains uncertain. As a result, Vulcan Materials did not re-issue any earnings guidance.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

Currently, Vulcan has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Vulcan has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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