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Why Is Vulcan (VMC) Up 2.9% Since Last Earnings Report?

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It has been about a month since the last earnings report for Vulcan Materials (VMC - Free Report) . Shares have added about 2.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Vulcan due for a pullback? 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 Misses on Q2 Earnings

Vulcan Materials Company reported lackluster results for second-quarter 2021, with earnings and revenues lagging the Zacks Consensus Estimate. Its bottom line declined on a year-over-year basis despite top-line growth, primarily due to energy inflation and disruptive weather witnessed during the reported quarter. Energy inflation reduced profits by $25 million, and diesel and liquid asphalt impacted the same by $15 million and $10 million, respectively.  Lower non-aggregates earnings also dampened the results.

Chairman and CEO Tom Hill said, "We expect to carry forward the progress we have made through the first half of 2021 and will continue to diligently navigate the changing macro environment. Recent pricing actions across much of our footprint and a keen focus on improving operating efficiencies will continue to help offset spikes in certain input costs. The flexibility of our operating plans will enable us to maintain a high level of performance during the second half of the year and achieve our full-year 2021 targets. We remain excited and focused on closing the proposed acquisition of U.S. Concrete, which will expand Vulcan Materials’ footprint in attractive geographies and accelerate our growth strategy."

Inside the Headlines

Adjusted earnings of $1.57 per share missed the consensus mark of $1.67 by 6%. Also, the company’s bottom line slid 1.9% from the year-ago level.

Total revenues of $1,361 million lagged the consensus mark of $1,370 million by 0.7% but increased 2.9% year over year.

Segments in Detail

Aggregates

Revenues from the segment increased 5.1% year over year to $1,125.4 million owing to higher demand across all end-market segments. Aggregate shipments (volumes) were up 4.1% year over year. Strong demand and a positive pricing environment across the globe supported growth. For the quarter, freight-adjusted average sales price inched up 3% (2.6% on a mix-adjusted basis) from the prior-year level. Freight-adjusted revenues also rose 7.3% from the prior-year quarter to $874 million. Gross profit of $374 million was up 6% year over year, backed by strong volume and price as well as effective cost-control measures. Gross margin — as a percentage of segment sales — improved 40 basis points (bps).

Asphalt, Concrete and Calcium

Revenues from the Asphalt segment were $212.6 million, down 4.7% year over year. The segment generated gross profit of $24.5 million, reflecting a decline of 46% year over year. This was mainly due to the impact of higher liquid asphalt costs and wet weather conditions that delayed project shipments. Asphalt volumes contracted 8% as volume growth in California and Tennessee was more than offset by lower volumes in Alabama, Arizona as well as Texas.

Total revenues from the Concrete segment were $96.2 million, down 4.5% year over year. Further, gross profit totaled $10 million, down 28.6% year over year. Shipments declined 7% year over year due to the timing of projects in Virginia. Nonetheless, average selling prices increased 3% from the prior-year level.

Total revenues from the Calcium segment were up 3.8% from the prior-year figure to $1.96 million. The segment reported a gross profit of $0.7 million, in line with the prior-year level.

Operating Highlights

Selling, Administrative and General or SAG expenses — as a percentage of total revenues — rose 50 bps to 7.4%. The increase was mainly due to higher incentive compensation tied to business performance and increased business development activities. Adjusted EBIT fell 1.8% from the prior-year level to $302.9 million. Adjusted EBITDA was also down 0.4% year over year to $406 million.

Financials

As of Jun 30, 2021, cash and cash equivalents were $857.6 million, down from $1,197.1 million at 2020-end. Long-term debt was $2,769.9 million at June-end, slightly down from $2,772.2 million at 2020-end.

2021 View Reiterated

For 2021, the company anticipates adjusted EBITDA in the range of $1.380-$1.460 billion. SAG expenses are expected in the range of $365-$375 million. EPS is anticipated between $4.85 and $5.30. Aggregates shipments are projected to grow between 1% and 4%. The company expects 2-4% year-over-year growth in aggregates freight-adjusted price. Depreciation, depletion, accretion and amortization expense is expected to be $400 million. It remains optimistic about the pricing environment for 2021. Vulcan Materials expects capital expenditure between $450 and $475 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

Currently, Vulcan has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Vulcan has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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