Vulcan Misses Q2 Earnings, Beats Revs

Zacks

Vulcan Materials Company’s (VMC) adjusted earnings of 13 cents in the second quarter of 2013 lagged the Zacks Consensus Estimate of 14 cents per share by 7.14%. The adjusted earnings per share improved significantly from prior year quarter loss of 2 cents on the back of solid revenue increase in most of the segments.

Reported earnings in the quarter were 23 cents per share, significantly better than the prior-year quarter loss of 13 cents.

Total revenue of $738.7 million however surpassed the Zacks Consensus Estimate of $706 million by 4.6%. Total revenue increased 6.4% from the prior-year quarter owing to pricing gains and volume growth in most of the segments excluding asphalt mix.

Most of the volume and pricing increase was noted in the aggregates segment. The top line benefited from broad based recovery in private construction activity, especially residential. Total revenue comprised $696.1 of net sales and $42.7 million of delivery revenues.

Gross profits grew 25.5% to $132.9 million in the quarter due to solid revenue increase. Excluding gains on the sales of assets, restructuring cost and exchange offer costs, adjusted EBITDA was $141.2 million, up 10.9% from the prior-year quarter. Selling, general and administrative (SG&A) costs rose 4.8% from the prior-year quarter to $64.9 million.

Segment Details

Aggregates

Revenues rose 7.4% to $464 million (including inter-segment sales) in the quarter owing to gains from price increases and volume growth. Aggregates shipments (volumes) rose 2.0% year over year in the quarter, despite unfavorable weather in eastern United States. Average sales price increased 4% due to improvement in most markets.  

The company is witnessing a growing demand for private construction, including residential housing starts and contract awards for non-residential buildings, following a steady recovery in the overall housing industry. Due to growth in private construction activity, Vulcan saw more than 50% increase in shipment in the states of Arizona and Florida. Double-digit increase in shipment was also witnessed in Texas, central Gulf Coast, North Carolina and California.

Non-Aggregates

Revenues of the Concrete and Cement segment witnessed a year-over-year increase on the back of volume growth and price increase. The Asphalt segment witnessed a decline in revenues during the second quarter of 2013 due to weak volume and price dip.

Financial Update

The company reported cash and cash equivalents of $87.0 million as of Jun 30, 2013, compared to $188.1 million as of Mar 31, 2013.  
 
2013 Outlook

With the housing market gaining momentum, demand for Vulcan’s products, both aggregates as well as non-aggregates, is improving. The company expects earnings to improve in 2013 on the back of pricing growth, funding stability, aggressive cost control and volume increase.

Aggregates: Private construction demand is expected to grow. 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 to predict.

Aggregates shipments are expected to grow in the range of 2%-4% in the second half of 2013. However, volume growth is expected to be weighted more toward the second half of the year due to difficult weather comparisons in the year-ago quarter. The company expects 4% increase in pricing in 2013.

Non-Aggregates: The company expects earnings to improve in all the three non-aggregates segments in 2013. While Concrete volumes and material margins are expected to gain from improving housing starts, Cement earnings are expected to get a boost from higher shipment and pricing and also lower production costs.

Vulcan carries a Zacks Rank #4 (Sell).

Stocks in the construction sector that are currently performing well include Ryland Group Inc. (RYL), Anhui Conch Cement Co. Ltd. (AHCHY) and Texas Industries Inc. (TXI). All the companies carry a Zacks Rank #2 (Buy).

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