Vulcan Materials Company (VMC) is set to report second quarter 2013 results on Aug 1. Last quarter, it posted a 24.32% negative surprise. Let’s see how things are shaping up for this announcement.
Factors to Consider this Quarter
Vulcan’s overall results have been significantly hurt in the past few quarters due to persistent decline in aggregates shipments. Considering that aggregates is the flagship business of the company, overall sales, volumes and profitability are being significantly hurt due to weak performance of the business.
Recently, there has been an increase in aggregates demand in the private construction market. Management expects solid growth in aggregates demand in 2013 as private construction is expected to increase further. However, the company has limited visibility on aggregates demand in public construction, including highways and other infrastructure projects. Though the number of large highway and industrial projects are expected to grow with increased funding certainty as a result of the new highway bill, the timing of these projects is difficult to predict. Therefore, there is still some uncertainty around growth in public sector construction.
Our proven model does not conclusively show that Vulcan is likely to beat earnings this quarter. That is because a stock needs to have both a positive earnings expected surprise prediction or ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Negative Zacks ESP: Vulcan currently has an ESP of -21.43%.
Zacks Rank #4 (Sell). Vulcan’ Zacks Rank #4 (Sell) lowers the predictive power of ESP because the Zacks Rank #4 when combined with a negative ESP makes positive surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
We also see likely earnings beat coming from these 3 companies:
Ryland Group Inc. (RYL), Earnings ESP of +19.54% and a Zacks Rank #2 (Buy)
Standard Pacific Corp. (SPF), Earnings ESP of +9.09% and a Zacks Rank #3 (Hold)
The Home Depot, Inc. (HD), Earnings ESP of +1.68% and a Zacks Rank #2 (Buy)
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