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Why Is Vulcan (VMC) Up 3.9% 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 3.9% 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 its most recent earnings report in order to get a better handle on the important drivers.

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

Vulcan Materials Company reported solid second-quarter 2019 results, wherein the top and bottom lines surpassed the respective Zacks Consensus Estimate. Also, earnings and revenues improved year over year, given shipment growth, price improvements and operating efficiencies in the aggregates business. Moreover, robust growth in public construction demand and continued improvement in private demand added to the positives.

The company — which is one of the largest producers of construction aggregates — reported adjusted earnings of $1.48 per share, surpassing the consensus mark of $1.45 by 2.1%. Total revenues of $1,327.7 million outpaced the consensus mark of $1,306 million by 1.7%.

On a year-over-year basis, its earnings and revenues grew 20.4% and 10.6%, respectively, in the quarter.

Segments in Detail

Aggregates

Revenues from the segment increased 11% year over year to $1,062.1 million. Freight-adjusted revenues also rose 10.4% from the prior-year quarter to $806.4 million. The upside was mainly driven by shipment growth, higher pricing, and solid execution of operating disciplines and efficiencies.

Aggregate shipments (volumes) were up 4% year over year, reflecting solid underlying demand, mainly arising from public funding for highways, and employment and population growth, particularly in Southeast and Mid-Atlantic regions. Yet, adverse weather delayed shipments across Illinois, Tennessee and Texas.

Gross profit of $329 million was up 16% year over year. Also, gross margin (as a percentage of segment sales) expanded 140 basis points (bps) to 31% on the back of solid growth in shipments and price improvements.

Asphalt, Concrete and Calcium

Revenues from the Asphalt Mix segment were $247.2 million, up 16.7% year over year. The segment recorded a gross profit of $27.6 million versus $25.8 million a year ago due to lower material margins. Asphalt mix selling prices increased 8% or $4.34 per ton and shipments grew 8% from the prior-year quarter.

Unit cost of liquid asphalt, which recorded a 16% year-over-year increase in the second quarter, was relatively stable throughout the first half of 2019.

Total revenues from the Concrete segment were $103.8 million, down 2.8% year over year. Moreover, gross profit totaled $12.9 million, down 2.3% year over year. Same-store shipments were down 11.1% year over year but average selling prices grew 5%.

Total revenues from the Calcium segment were down 12.2% from the prior-year figure to $2 million. The segment reported gross profit of $0.8 million versus $0.7 million in the prior-year quarter.

Operating Highlights

Selling, Administrative and General or SAG expenses were $95.7 million, increasing 7.5% year over year. As a percentage of revenues, the metric improved 20 bps year over year. Also, adjusted EBITDA was up 15% year over year to $372 million, driven by strong shipments and pricing.

Financials

As of Jun 30, 2019, cash and cash equivalents were $26 million, down from $40 million at the end of 2018, as well as $55.1 million recorded in the comparable year-ago period.

In second-quarter 2019, Vulcan Materials returned $41 million to its shareholders, which is 11% higher from the year-ago level. At the end of the quarter, total debt — which amounted to $2.9 billion — was 2.4 times of its trailing 12-month adjusted EBITDA.

2019 Guidance Reiterated

Vulcan Materials expects double-digit earnings growth in 2019. Its earnings from continuing operations for the full year are expected within $4.55-$5.05 and adjusted EBITDA is projected in the range of $1.250-$1.330 billion.

How Have Estimates Been Moving Since Then?

Estimates review followed an upward path over the past two months.

VGM Scores

Currently, Vulcan has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 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

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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