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Vulcan (VMC) Up 4.8% Since Last Earnings Report: Can It Continue?

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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 4.8% 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) Q3 Earnings Miss, Revenues Beat

Vulcan Materials Company reported mixed third-quarter 2019 results, wherein earnings missed the Zacks Consensus Estimate but revenues beat the same. Earnings and revenues improved on a year-over-year basis, given solid shipment growth and strong pricing in the aggregates business. Also, robust growth in public construction demand and continued improvement in private demand added to the positives.

Vulcan Materials — which is one of the largest producers of construction aggregates — reported adjusted earnings of $1.68 per share, lagging the consensus mark of $1.70 by 1.2%. However, the company’s bottom line improved 20% from the year-ago level. Total revenues of $1,418.8 million outpaced the consensus mark of $1,368.3 million by 3.7% and increased 14.4% year over year.

Segments in Detail

Aggregates

Revenues from the segment increased 15% year over year to $1,133.1 million. Freight-adjusted revenues also rose 14.5% from the prior-year quarter to $858.5 million. The upside was mainly driven by shipment growth, higher pricing, and solid execution of operating disciplines and efficiencies.

Aggregate shipments (volumes) were up 8.4% year over year, reflecting solid underlying demand, mainly arising from public funding for highways, and employment and population growth. The company registered double-digit growth in certain markets in the Mid-Atlantic, Southeast and Texas. All the markets served by Vulcan Materials recorded pricing improvement on a year-over-year basis. Gross profit of $357.2 million was up 17.6% year over year. Also, gross margin — as a percentage of segment sales — expanded 60 basis points (bps) to 31.5% on the back of solid growth in shipments and price improvements.

Asphalt, Concrete and Calcium

Revenues from the Asphalt Mix segment were $270.2 million, up 16.6% year over year. The segment recorded gross profit of $27.6 million versus $23.9 million a year ago. Asphalt mix selling prices increased 3% or $1.62 per ton and shipments grew 18% from the prior-year quarter. Unit cost of liquid asphalt recorded a 6% year-over-year increase in the third quarter.

Total revenues from the Concrete segment were $113 million, up 11.1% year over year. Moreover, gross profit totaled $15 million, up 3% year over year. Same-store shipments were up 12.5% year over year and average selling prices grew 1%.

Moreover, total revenues from the Calcium segment were up 10.8% from the prior-year figure to $2.1 million. The segment reported gross profit of $0.8 million versus $0.9 million in the prior-year quarter.

Operating Highlights

Selling, Administrative and General or SAG expenses were $88.8 million, increasing 8.8% year over year. As a percentage of revenues, the metric improved 30 bps year over year. Also, adjusted EBITDA was up 15.1% year over year to $406.8 million, driven by strong shipments and pricing.

Financials

As of Sep 30, 2019, cash and cash equivalents were $90.4 million, up from $40 million at the end of 2018, and $38 million in the comparable year-ago period. In third-quarter 2019, Vulcan Materials returned $41 million to its shareholders through dividends, which increased 11% from the year-ago level. Vulcan Materials repurchased $3 million worth of shares during the quarter. At the end of the quarter, total debt — which amounted to $2.8 billion — was 2.2 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.

2020 Guidance

The company expects 2020 to be a year with strong earnings growth, led by improvement in aggregates unit margins. It expects aggregates shipments to register low-to-mid-single-digit growth. Vulcan-served markets should continue to benefit from public construction demand, led by significantly higher levels of highway funding in key states. Private construction shipment momentum remains positive across most of its markets. It expects this shipment momentum to continue into 2020. Demand fundamentals, including population and employment growth, continue to support longer-term growth in residential and nonresidential construction. Current construction trends are expected to be supportive of low mid-single digit price growth into 2020.

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, Vulcan has a strong Growth Score of A, 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

Estimates have been broadly trending downward for the stock, and the magnitude of this revision has been net zero. 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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