On Apr 10, 2014, we issued an updated research report on
Vulcan Materials Company
The Zacks Rank #1 (Strong Buy) company's second-half 2013
revenues and profits increased significantly from the first half
as improving private construction activity and better weather
conditions markedly raised volumes in all segments. Improved
volumes favored pricing across most of its markets. Volumes
improved 8% in the second half.
Additionally, most of the volume and pricing increase was
noted in the aggregates segment, which was sluggish in 2012 as
well as in the first half of 2013. Strong volume and pricing
growth coupled with aggressive cost control also significantly
improved earnings and profitability in the second half.
In fact, aggregates shipments grew 4% in 2013, a significant
improvement from declines of 1% and 3% witnessed in 2012 and
2011, respectively. Encouragingly, 2013 was the first year of
aggregates volume growth since 2005. Management expects
aggregates demand and volumes to increase in 2014 led by private
construction projects. Strong growth potential in Vulcan's served
markets and the meaningful operating leverage that exists in the
aggregates business are expected to drive earnings growth and
cash generation in 2014 as volumes improve.
Further, Vulcan's Profit Enhancement Plan implemented over the
past two years has increased adjusted EBITDA by $116 million,
generated more than $1 billion from the sales of non-strategic
assets and future sales production agreements, and reduced total
debt approximately $800 million. Also, in Feb 2012, the
company committed to generate $500 million in proceeds from the
sale of non-strategic assets. However, the company comfortably
exceeded the goal by generating over $1 billion including the
transaction with Argos.
In Mar 2014, the company sold its cement and concrete
businesses in the Florida area to Cementos Argos for $720
million. In addition, the company strengthened the core
aggregates business through the acquisition of reserves and
quarries in California, Georgia, Texas and Virginia.
However, though growing demand in the private construction
market is boosting aggregates volumes, the company has limited
visibility on growth in aggregates demand in public construction,
including highways and other infrastructure projects. Further,
the current two-year federal highway bill expires at the end of
Sep 2014, creating uncertainty around funding for highway
construction. This could hurt aggregates volume in the public
sector and prove to be a drag on the company's growth
Other Stocks to Consider
Other building stocks worth considering include
United Rentals, Inc.
Gibraltar Industries, Inc.
William Lyon Homes
). While William Lyon enjoys the same rank as Vulcan Materials,
United Rentals and Gibraltar Industries carry a Zacks Rank #2
GIBRALTAR INDUS (ROCK): Free Stock Analysis
UTD RENTALS INC (URI): Free Stock Analysis
VULCAN MATLS CO (VMC): Free Stock Analysis
WILLIAM LYON HM (WLH): Get Free Report
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