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Valmont (VMI) Misses on Q2 Earnings & Sales, Lowers FY19 View

Zacks Equity Research

Valmont Industries, Inc. VMI registered profits of roughly $41.4 million or $1.90 per share in second-quarter 2019, up around 26% from roughly $33 million or $1.46 in the year-ago quarter.

The bottom line in the reported quarter includes pre-tax expenses of roughly $6 million ($4.3 million post-tax) associated with specific non-recurring items affecting the company’s Utility Support Structures and Coatings segments.

Barring one-time items, adjusted earnings in the reported quarter came in at $2.10 per share which lagged the Zacks Consensus Estimate of $2.24.

Revenues in the quarter were $700.9 million, up roughly 3% year over year, driven by strong demand in transportation and wireless communication, contributions from acquisitions and favorable pricing across the company’s portfolio. The figure, however, missed the Zacks Consensus Estimate of $726 million. 

Valmont Industries, Inc. Price, Consensus and EPS Surprise

 

Valmont Industries, Inc. Price, Consensus and EPS Surprise

Valmont Industries, Inc. price-consensus-eps-surprise-chart | Valmont Industries, Inc. Quote

Segment Highlights

Infrastructure-Related


Sales in the Engineered Support Structures segment totaled $258.7 million, up around 3% year over year. Sales were driven by higher volumes in North America, favorable pricing and acquisitions.

Sales in the Utility Support Structures rose roughly 6% year over year to $209.8 million, driven by sales from acquisitions and favorable pricing in bid markets.

Sales in the Coatings segment rose around 7% year over year to $98.4 million on the back of higher sales across all regions, supported by recent acquisitions and pricing discipline.

Agriculture-Related

Sales in the Irrigation unit amounted to $155.2 million, down around 5% year over year. Sales in North America were $102.8 million, down around 10% from the year-ago quarter.

Per the company, sustained low net farm income and unfavorable weather conditions are affecting farmer sentiment and demand. Pricing, better product mix and higher technology sales were masked by lower volumes.

International irrigation sales rose around 7% year over year to $52.4 million, supported by stronger demand across Brazil and the EMEA, partly offset by unfavorable currency swings.

Financial Position

Valmont ended the quarter with cash and cash equivalents of $256.9 million, down roughly 64% year over year. Long-term debt at the end of the quarter was $765.6 million, down around 23% year over year.

Operating cash flow for the second quarter was $105 million.

The company bought back 236,300 shares for $28.9 million in the reported quarter.

Outlook

The company has lowered earnings per share expectation for 2019 to the range of $8.10-$8.70 from $8.30-$8.90 factoring in non-recurring expenses recognized in the second quarter.

Valmont now expects revenue growth of 6-7% year over year in 2019 (down from prior growth expectations of 7-8%) considering lower international irrigation demand and a stronger U.S. dollar. Capital spending guidance for the year is unchanged from prior forecast of $90-$100 million.  

Price Performance

Valmont’s shares have gained around 25.4% year to date compared with the industry’s 19.9% rise.



 

Zacks Rank & Key Picks

Valmont currently carries a Zacks Rank #1 (Strong Buy).

Other top-ranked stocks worth considering in the basic materials space include Israel Chemicals Ltd. ICL, Flexible Solutions International Inc FSI and Air Products and Chemicals, Inc. APD.

Israel Chemicals has an expected earnings growth rate of 13.5% for the current year and carries a Zacks Rank #1. Its shares are up roughly 8% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Flexible Solutions has an expected earnings growth rate of 342.9% for the current fiscal year and carries a Zacks Rank #2 (Buy). Its shares have surged around 151% in the past year.

Air Products has an expected earnings growth rate of 10.3% for the current fiscal year and carries a Zacks Rank #2. The company’s shares have gained around 39% over the past year.  

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