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Valmont (VMI) to Purchase Remaining 49% Stake in AgSense

Zacks Equity Research

Valmont Industries, Inc. VMI recently inked a deal to acquire the remaining 49% interest in AgSense for a purchase price of roughly $42 million. The acquisition will be financed with cash on hand and is anticipated to be concluded later this month.

The company’s consolidated financial statements include the operating results for AgSense since the purchase of a 51% stake in August 2014.

The deal is not expected to impact operating income or net revenues. However, it will be accretive to earnings per share (EPS) in fiscal 2020 primarily due to change in earnings attributable to noncontrolling interests.

Per Valmont’s management, complete ownership of AgSense complements its strategic priority to strengthen leadership position in global technology. Further, AgSense’s profitable and recurring revenue service model has created a technology sales growth engine that will benefit Valmont’s shareholders and customers.

Acquiring 100% stake in AgSense marks another important milestone as Valmont continues to carry out its technology strategy.

Valmont’s shares have gained around 36.6% in the past year compared with the industry’s growth of 14.4%.

In October 2019, the company lowered earnings per share expectation for full-year 2019 to $7.05-$7.45 from its prior view of $8.10-$8.70. The company expects revenue growth of 1-2% year over year for 2019 (down from prior growth expectation of 6-7%).

Per management, North American market demand in Engineered Support Structures and Utility Support Structures unit remains robust. However, Irrigation unit sales are trending approximately 10% below its previous expectations for 2019.

Moreover, Valmont expects the recent slowdown in U.S. industrial production to hurt Coatings unit volumes in the fourth quarter. Considering shipment schedules, it does not expect wireless communication sales in the fourth quarter to grow rapidly. However, the company expects persistent growth in 2020.

Valmont Industries, Inc. Price and Consensus

Valmont Industries, Inc. Price and Consensus
Valmont Industries, Inc. Price and Consensus

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

Zacks Rank & Stocks to Consider

Valmont currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks worth considering in the basic materials space include Daqo New Energy Corp. DQ, Pan American Silver Corp. PAAS and Sibanye Gold Limited SBGL, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Daqo New Energy has projected earnings growth rate of 294.7% for 2020. The company’s shares have rallied 122% in a year’s time.

Pan American Silver has estimated earnings growth rate of 38.1% for 2020. The company’s shares have surged 57% in a year’s time.

Sibanye Gold has projected earnings growth rate of 587.5% for 2020. The company’s shares have soared 232% over a year.

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