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Why Is Valmont (VMI) Up 9% Since Last Earnings Report?

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It has been about a month since the last earnings report for Valmont Industries (VMI - Free Report) . Shares have added about 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 Valmont 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 drivers.

Valmont's Earnings Beat, Sales Trail Estimates in Q3

Valmont reported profits of roughly $4.4 million or 20 cents per share in third-quarter 2018, down 87.5% from a profit of $35.2 million or $1.55 a year ago. Adjusted earnings in the quarter were $1.82 per share, exceeding the Zacks Consensus Estimate of $1.80.

Net sales in the quarter totaled $678.7 million, moderately down year over year. The figure lagged the Zacks Consensus Estimate of $681 million. Meanwhile, revenues improved at the Engineered Support Structures, Utility Support Structures and Coatings segments.

Review of the Segments:

Infrastructure-Related

Engineered Support Structures segment sales of $251.5 million were up 2.1% from prior-year quarter owing to solid sales in the North America transportation market. The company saw higher sales of lighting and traffic products.

Utility Support Structures sales increased 6.6% year over year to $218.3 million.
 
Coatings segment recorded year-over-year net sales growth of 9.5% to $90.4 million. This was mainly driven by recovery of higher zinc costs through pricing and strong industrial demand in North America.

Agriculture-Related

Irrigation reported net sales of $140.2 million, down 4.9% year over year owing to lower sales in international market compared with the previous year. Sales were affected by unfavorable currency translation and lower volumes in emerging markets.

Financial Position

Valmont ended third-quarter 2018 with cash balance of $295.6 million, down roughly 40% year over year. Long-term debt at the end of the quarter was $736.2 million, down around 2.4%.

Outlook

The company now expects adjusted earnings per share in the range of $7.50-$7.65 and revenues in the band of $2.75-$2.80 billion.
Valmont expects fourth-quarter revenues to be in line with last year. At the Engineered Support Structures segment, sales growth is supported by strong economic demand. Volumes at the Utility segment are expected to decline owing to a less favorable product mix in North America and unfavorable comparisons in the offshore wind business. Coatings segment revenues are expected to be similar to last year. Irrigation segment sales are also expected to be comparable to last year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Valmont has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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, Valmont has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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