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Vulcan Misses Estimates, Trims View

Zacks Equity Research

Vulcan Materials Company (VMC) posted adjusted earnings of 14 cents per share in the third quarter of 2012, missing the Zacks Consensus Estimate of 17 cents per share due to decline in revenue and volumes. However, the results were better than the prior-year quarter loss of 13 cents as the top-line decline was offset by margin gains.

Total revenue in the quarter declined 4.2% to $728.9 million, mainly due to a 3.2% volume decline in the Aggregates segment. Revenues also lagged the Zacks Consensus Estimate of $747 million by a wide margin. Total revenue comprised $687.6 of net sales and $41.3 million in delivery revenue.

Consolidated gross margins improved 230 basis points in the quarter on the back of higher pricing and lower unit cost of sales due to improved productivity. Adjusted earnings before interest, taxes, depreciation and amortization (:EBITDA) was $146.0 million, up 8.8% from the prior-year quarter, driven by improved gross margins and lower selling, administrative and general (:SAG) costs. SAG costs declined 2.4% from the prior-year quarter attributable to Vulcan’s cost saving efforts.

Segment Results

Aggregates: Revenue declined 4.6% to $491.2 million (excluding inter-segment sales) in the quarter due to an unfavorable geographic mix of shipments. Aggregates shipments declined 6.0% from the prior-year quarter. Average sales price increased 4% in this segment.

However, gross profit margin rose 340 basis points to 25.4%, as revenue decline was offset by improved productivity and cost reduction initiatives, which contributed to lower unit cost of sales.

Non Aggregates: Revenues from Concrete scaled up 7.2% to $108.7 million owing to benefit of volume growth. Revenues from Asphalt Mix declined 8.3% to $118.2 million due to decline in volumes, and average sales prices. Revenues from Cement surged 18.8% to $22.7 million (excluding inter segment sales) owing to a rise in average sales prices.

Gross profit performances were flat year over year. The prices and volumes of the concrete and cement segments benefited from the rise in private construction activities, particularly in Florida, Texas and Arizona.


For fiscal 2012, management lowered its expectation of adjusted EBITDA to the range of $435 to $455 million, (up 23% to 29% year over year), from the prior guidance of $500 million. The reduced guidance was driven by lower expected volume of aggregate and asphalt. However, the company expects volume improvement in concrete and cement, driven by the improving housing market in the upcoming quarters.

A peer of Eagle Materials Inc. (EXP), Vulcan Materials Company carries a Zacks #4 Rank in the near term (Sell rating). We currently have a Neutral recommendation on Vulcan Materials Company.

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