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Vulcan Beats Q3 Earnings, Revs

Zacks Equity Research

Vulcan Materials Company’s (VMC) adjusted earnings of 32 cents in the third quarter of 2013 surpassed the Zacks Consensus Estimate of 25 cents per share by 28%. Adjusted earnings per share improved significantly from prior-year quarter earnings of 12 cents on the back of solid revenue increase in most of the segments.

Total revenue of $813.6 million beat the Zacks Consensus Estimate of $756 million by 7.6%. Total revenue increased 11.6% from the prior-year quarter owing to pricing gains and volume growth in most of the segments. Total revenue comprised $775.2 million of net sales and $38.4 million of delivery revenues in the third quarter.

Top-line growth was driven by improved product demand owing to broad based recovery in private construction activity, especially residential. 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% to $159.0 million in the quarter due to solid revenue increase. Adjusted EBITDA was $171.2 million, up 17.3% from the prior-year quarter. Selling, general and administrative (SG&A) costs rose slightly from the prior-year quarter to $65.9 million.

Segment Details

Aggregates: Revenues rose 12.5% to $504.7 million (including inter-segment sales) in the quarter owing to gains from price increases and volume growth. Aggregates shipments (volumes) rose 9.0% year over year in the quarter, while average sales price increased more than 2% due to improvement in most markets. 

The company is witnessing 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 35% increase in shipments in Florida and growth of more than 14% in the states of Arizona, California, Georgia and North Carolina. Large industrial projects in Texas also benefited shipments.  Double-digit volume growth was also witnessed in many other key markets of Vulcan.


Each of the non-aggregates segments of the Concrete, Cement and Asphalt segments witnessed a year-over-year increase on the back of volume growth and price increase.

Financial Update

The company reported cash and cash equivalents of $245.8 million as of Sep 30, 2013, compared with $87.0 million as of Jun 30, 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. However, the company expects volume growth to weigh more toward the remaining half of the year and help offset the impact of several large highway and industrial projects that have now been deferred into the first half of 2014.

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 lower production costs. Asphalt materials margin will continue to improve in 2013 owing to lower liquid asphalt costs.

Vulcan carries a Zacks Rank #3 (Hold).

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

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