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Vulcan Materials (VMC) Loss Narrows; Sales Beat Estimates - Analyst Blog

Vulcan Materials Company 's VMC first-quarter 2015 adjusted loss of 16 cents per share was narrower than the Zacks Consensus Estimate of a loss of 17 cents by almost 6%. Adjusted loss also narrowed significantly from the prior year quarter's loss of 28 cents on the back of solid aggregates volume growth, strong pricing and improved margins.

The first quarter of 2015 was marked by strengthening aggregate demand in Vulcan's served markets, despite poor weather hampering construction in some markets. The quarterly results particularly benefited from cost savings of $14 million from lower diesel fuel costs.

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Total revenue of $631 million surpassed the Zacks Consensus Estimate of $602 million by 4.8%. Results increased 10% from the prior-year quarter owing to strong performance of the aggregate unit and better results in the other segments.

Gross profit improved 128% year over year to $78 million driven by solid volume growth and operating leverage in the Aggregates segment. Adjusted gross margin (excluding freight and delivery revenues) of 14.8% increased 780 basis points (bps). Cash gross profit per ton increased 18% year over year.

Adjusted EBITDA was $77 million, up 97% from the prior-year quarter.

Segment Details

Aggregates

Revenues rose 9.9% year over year to $631.3 million owing to higher shipments. Freight-adjusted revenues increased 17% year over year to $380 million. The company witnessed strong trends in private construction - both residential and non-residential.

Despite unfavorable weather in major markets, aggregates shipments (volumes) rose 13% year over year due to overall strength in end markets.

Same-store aggregate shipments increased 9% year over year, as the company recorded over 10% increase in shipments in Arizona, Florida, Illinois, North Carolina, Texas and Virginia. Though shipments in Georgia declined 4% year over year owing to poor weather, aggregates shipments in California increased 8%.

Freight-adjusted average sales price increased 4% on a same store basis, driven by price increases in most of the markets, partially offset by unfavorable product mix in key markets. Aggregates segment gross profit per ton increased 9%.

Non-Aggregates

Adjusted total revenue in the Concrete segment was $54.7 million, up 13.5% year over year driven by higher prices. The segment volume was flat year over year owing to cold weather in Virginia and Maryland. Adjusted gross profit was $1.6 million as against the year-ago quarter loss of $4.4 million due to pricing gains.

Revenues in the Asphalt Mix segment were $103.1 million, up 22.5% year over year on the back of volume and price increase. Gross profit was up 87.2% to $8.8 million due to higher margins and volume growth, particularly in Arizona and California.

Adjusted total revenue in the Calcium segment (formerly Cement) were $1.9 million, down from $2.2 million in the prior year quarter. In the quarter, the segment posted adjusted gross profit of $0.6 million, up from $0.4 million in the prior-year quarter.

Vulcan Materials exited the Cement business with the sale of the Florida facilities in Mar 2014. The company, however, retained the calcium operation at the Brooksville, FL facility and renamed the segment as Calcium. The Florida calcium facility mines, produces and sells calcium products.

2015 Outlook

Vulcan is optimistic about its prospects this year as momentum remains strong in its served markets. The company expects increases in volumes, pricing and margins across its markets in 2015.

Vulcan expects adjusted EBITDA in the range of $775 million to $825 million, driven by solid increase in aggregates gross profit, earnings improvement in non-aggregates segments and leverage from selling, administrative and general expenses. However, if the cost savings from lower price of diesel noted in the first quarter continue, adjusted EBITA is expected to be at the higher end of the guidance.

Aggregates: The company expects full-year 2015 aggregates shipments to increase 11%. Same-store volumes are expected to increase 8%. We expect overall aggregates pricing to continue to rise throughout the year. Average freight-adjusted aggregates prices are expected to increase 6%.

Vulcan Materials sports a Zacks Rank #1 (Strong Buy).

Key Picks from the Sector

Other stocks in the building/construction sector that are worth considering include HeidelbergCement AG HDELY , Quanex Building Products Corporation NX and Owens Corning OC . While Quanex Building Products sports a Zacks Rank #1, HeidelbergCement AG and Owens Corning carry a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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