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Strong Buy on Vulcan Material

Zacks Equity Research

Zacks Investment Research upgraded Vulcan Material Company (VMC) to a Zacks Rank #1 (Strong Buy) on Nov 6 on the back of strong third quarter 2013 results.

Why the Upgrade?

On Nov 4, Vulcan Material posted third quarter fiscal 2013 results, beating the Zacks Consensus Estimate on both counts. Adjusted earnings of 32 cents improved significantly from the prior-year quarter earnings of 12 cents on the back of a solid revenue increase in most of the segments. Revenues increased double-digits owing to pricing gains and volume growth.

Improved product demand owing to broad-based recovery in private construction activity, especially residential boosted the top-line performance. Improved demand also favored pricing across most of its markets. Additionally, most of the volume and pricing increase was noted in the aggregates segment.

Gross profit grew 25.3% in the quarter due to solid revenue increase. Adjusted EBITDA increased 17.3% from the prior-year quarter.

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 the fourth quarter as well on the back of pricing growth, funding stability, aggressive cost control and volume increase.

Most homebuilders believe the housing momentum will continue into 2014. Thus, improving outlook of homebuilders will also benefit companies like Vulcan.

Other Stocks to Consider

Other stocks in the construction sector that are currently performing well include M/I Homes Inc (MHO), Cementos Pacasmayo SAA (CPAC) and Meritage Homes Corp. (MTH). While M/I Homes holds a Zacks Rank #1, Cementos and Meritage carry a Zacks Rank #2 (Buy).

Read the Full Research Report on VMC
Read the Full Research Report on CPAC
Read the Full Research Report on MTH
Read the Full Research Report on MHO

Zacks Investment Research