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Vulcan Materials (VMC) Beats on Q1 Earnings, Revokes '20 View

Zacks Equity Research

Vulcan Materials Company VMC reported impressive results in first-quarter 2020. Both the top and bottom lines not only surpassed the Zacks Consensus Estimate but also improved year over year on the back of solid segmental performance, despite wet weather in certain key markets in Southeast and Southwest.

Shares of the company gained 2.6% in the pre-market trading session on May 6, given strong earnings and revenues in the reported quarter.

The company believes its four strategic disciplines (Commercial and Operational Excellence, Logistics Innovation and Strategic Sourcing) implemented over the last few years will help the business to combat COVID-19 impacts in the future. Meanwhile, it expects modification in project timelines despite active shipments in certain markets served.

Vulcan Materials — which is one of the largest producers of construction aggregates — reduced 2020 capital spending projection to $275-$325 million (versus $475 million expected earlier). Because of uncertainty in aggregates demand caused by COVID-19, the company withdrew its previously announced financial guidance for 2020.

Inside the Headlines

Adjusted earnings of 47 cents per share surpassed the consensus mark of 41 cents by 14.6%. Also, the company’s bottom line improved 2.2% from the year-ago level.

Vulcan Materials Company Price, Consensus and EPS Surprise

Vulcan Materials Company Price, Consensus and EPS Surprise

Vulcan Materials Company price-consensus-eps-surprise-chart | Vulcan Materials Company Quote

Total revenues of $1,049.2 million topped the consensus mark of $1,008 million by 4.1% and increased 5.3% year over year.

Segments in Detail

Aggregates

Revenues from the segment increased 4% year over year to $868.2 million owing to higher shipments in certain key markets and pricing.

Aggregate shipments (volumes) were down 1% year over year. The decline in shipments in the quarter and wet weather in Southeast and Southwest regions were partially offset by growth in California, Florida, Illinois, and Virginia markets.

During the quarter, freight-adjusted average sales price increased 4.5% (4.8% on a mix-adjusted basis) from the prior-year quarter. Freight-adjusted revenues also rose 3.1% from the prior-year quarter to $648 million.

Gross profit of $194 million was up 5% year over year, backed by growth in shipments in certain key markets and widespread growth in pricing. Gross margin — as a percentage of segment sales — improved 20 basis points (bps) to 22.4%. Higher repairs, maintenance and stripping costs, as well as wet weather in certain markets served were partially offset by modestly lower unit cost of diesel fuel in the quarter.

Asphalt, Concrete and Calcium

Revenues from the Asphalt segment were $139.8 million, up 5.8% year over year. The segment recorded gross loss of $2 million, narrower than the year-ago loss of $3 million. Asphalt mix selling prices increased 5% and shipments grew 2% from the prior-year quarter. The company's largest asphalt market — California — reported solid volume growth, which offset the lower volumes in Texas. The average unit cost for liquid asphalt was 6% lower than the prior-year quarter.

Total revenues from the Concrete segment were $94.8 million, up 13.3% year over year. Moreover, gross profit totaled $9 million, up 8% year over year. Shipments were up 10% year over year, backed by growth in its two largest concrete markets — Northern Virginia and Northern California. Average selling prices grew 3% year over year.

Total revenues from the Calcium segment were up 3.8% from the prior-year figure to $2 million. The segment reported gross profit of $0.8 million, up 21.9% from the prior-year quarter.

Operating Highlights

Selling, Administrative and General or SAG expenses — as a percentage of total revenues — improved 90 bps to 8.2%. The improvement was mainly driven by cost-reduction initiatives and adjustments to stock-based compensation to reflect a lower share price. Adjusted EBIT grew 1.9% from the prior-year quarter to $105.5 million. Adjusted EBITDA was also up 9.3% year over year to $201 million.

Financials

As of Mar 31, 2020, cash and cash equivalents were $120 million, up from $30.8 million in the comparable year-ago period but down from $271.6 million at 2019-end. Long-term debt was 2.8 billion, slightly up from the year-ago quarter and 2019-end.

Trailing-12 month total debt-to-adjusted EBITDA was 2.2. Notably, its weighted average debt maturity is 14 years. Also, the effective weighted average interest rate was 4.2%.

At the end of the quarter, it entered into a $750-million 364-day delayed-draw term loan to enhance its liquidity position. On Mar 31, 2020, there were no borrowings outstanding under the existing $750-million revolving credit facility.

Vulcan Materials returned $45 million to shareholders through dividends, up 10% from the prior-year quarter. Share repurchases were $26 million in the quarter.

Zacks Rank & Peer Release

Vulcan Materials — which shares space with Summit Materials, Inc. SUM and Eagle Materials Inc. EXP in the Zacks Building Products - Concrete and Aggregates industry — currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Martin Marietta Materials, Inc. MLM reported lower-than-expected earnings in first-quarter 2020. The downside was due to the impact of lower unit production costs on aggregates inventory standards and a change in tax election for a subsidiary.

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