On Oct 3, we maintained a Neutral recommendation on
Vulcan Materials Company
) due to mixed second-quarter results. While aggregates volume
rebounded in the second quarter after declining in the past four
quarters, we await a substantial and consistent improvement
before turning more positive on the stock.
Vulcan announced mixed second-quarter results on Aug 1.
Adjusted net earnings of 13 cents per share missed the Zacks
Consensus Estimate of 14 cents by 7.14%. The adjusted earnings,
however, improved significantly from prior-year quarter loss of 2
cents on the back of solid revenue increase in most of the
segments. Total revenue grew 6.4% year over year and also beat
the Zacks Consensus Estimate by 4.6% owing to growth in both
volumes and pricing. Broad based recovery in private construction
activity, particularly residential construction is boosting the
demand for Vulcan's products.
In fact, aggregates volumes grew 2% in the second quarter,
rebounding from the decline witnessed in the past four quarters.
Aggregates pricing also continues to gain traction. Management
expects second-half aggregates volumes to be better than the
first half. However, management's outlook for the second-half
volumes brings implied full-year 2013 shipments to the lower end
of the prior guidance of 1%-5%. Encouragingly, however, faster
growth in aggregates volume is expected in 2014 as private
construction demand is expected to continue to rise.
Vulcan is now witnessing increasing demand for private
construction; specifically residential housing starts and
contract awards for non-residential buildings are growing,
following steady recovery in the overall housing industry. Though
private construction is expected to continue to improve in the
second half, uncertainty looms around the public construction
market. In public construction market, though the number of large
highway and industrial projects are expected to grow with
increased funding certainty from the new highway bill, the timing
of these projects is difficult for management to predict.
Accordingly, we prefer to wait for further visibility of
substantial growth in public sector construction.
Other Stocks to Consider
Vulcan carries a Zacks Rank #4 (Sell). Other stocks in the
building materials/home improvement sector that are worth
Anhui Conch Cement Co. Ltd.
). While AHCHY and HCMLY carry a Zacks Rank #1 (Strong Buy), MAS
carries a Zacks Rank #2 (Buy).
ANHUI CONCH CEM (AHCHY): Get Free Report
HOLCIM LTD U-AD (HCMLY): Get Free Report
MASCO (MAS): Free Stock Analysis Report
VULCAN MATLS CO (VMC): Free Stock Analysis
To read this article on Zacks.com click here.