We issued an updated research report on Vulcan Materials Company VMC on Jun 9, 2016.
After a solid performance in 2015, Vulcan Materials started 2016 on a strong note wherein both its first-quarter earnings and sales beat the Zacks Consensus Estimate amid strong demand trends in the construction end markets.
The company posted adjusted earnings of 26 cents per share, improving significantly year over year on the back of higher revenues and robust margins. Sales surged 20% year over year, backed by strong volumes as well as consistent pricing momentum in the Aggregates segment.
Despite weather-related headwinds in California and Texas, aggregates shipments (volumes) rose 17% year over year driven by demand growth as a result of improving construction trends.
Backed by the strong first quarter results, the company raised its adjusted EBITDA and aggregates shipments guidance for 2016.
The company is witnessing a sharp increase in aggregates demand, backed by improvement in private construction demand — both residential and non-residential. Moreover, large transportation projects and growth in contract work for highways has steadily increased the demand for Vulcan’s products in the public construction market.
Construction activity and demand for aggregates continue to recover across all the markets in both private and public sector which, coupled with robust pricing momentum, should drive revenues for this construction aggregates company as the year progresses.
However, construction labor shortages and other bottlenecks are partially hurting demand growth. Moreover, Vulcan Materials is witnessing some below-normal demand trends in some markets of Texas, like Houston, Nonetheless, the company enjoys strong fundamentals and should be able to withstand these short-term headwinds and do well in 2016.
Vulcan Materials carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector are TopBuild Corp. BLD, Simpson Manufacturing Co., Inc. SSD and Installed Building Products, Inc. IBP. All the three stocks carry a Zacks Rank #1 (Strong Buy).
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