On Mar 5, we issued an updated research report on steel pipe
and tube company
Valmont Industries, Inc.
). While the company should gain from strong demand environment
across utility and coatings markets, it is exposed to volatility
in raw material costs, near-term challenges in its irrigation
business and a still challenging operating backdrop in Europe.
Valmont posted mixed fourth-quarter 2013 results on Feb 20 with
adjusted earnings beating the Zacks Consensus Estimate while
sales missing the same. Profit fell by double digits year over
year, hurt by impairment and deconsolidation charges. The company
envisions a challenging first-quarter 2014 and expects earnings
to fall 25% year over year.
Valmont is witnessing significant strength across utility and
coatings markets. The company is poised to savor incremental
opportunity in the utility market driven by the ongoing
investment in North American transmission grid.
The global transmission and distribution markets are seen as
major long-term growth opportunities in the utility market.
Valmont also expects healthy demand for its Coatings segment
which is benefiting from Pure Metal acquisition.
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Moreover, Valmont is actively pursuing capacity expansion through
new constructions and extension of existing facilities to meet
the increasing demand from utility customers in North America.
Acquisitions will also support growth in 2014.
However, Valmont remains affected by a still weak operating
environment in Europe. In its Engineered Infrastructure Products
division, weak government infrastructural funding is affecting
lighting and traffic product markets. Moreover, results in the
company's North American irrigation business are expected to be
hurt by lower commodity prices in the first quarter.
Valmont is also exposed to volatility in raw material costs.
Higher-than-expected prices for key raw materials such as steel,
aluminum and zinc, along with their reduced availability, may
raise the company's operating costs and reduce its profitability.
Key Picks from the Sector
Other companies in the steel and related industries with
favorable Zacks Rank are
United States Steel Corp.
AK Steel Holding Corp.
Worthington Industries, Inc.
). All of them hold a Zacks Rank #2 (Buy).