Will Vulcan Repeat its Earnings Miss?
Vulcan Materials Company (VMC) is set to report its first-quarter 2013 results on May 2 before the market opens. Last quarter, it posted an 81.8% negative surprise. Let’s see how things are shaping up for this announcement.
Factors to Consider This Quarter
Vulcan’s overall results in 2012 have been significantly hurt due to volume declines in its flagship aggregates business. However, recently, aggregates demand is growing in the private construction market. Management is expecting solid growth in aggregates demand in 2013 as private construction demand is expected to continue rising. Aggregates shipments are expected to grow in the range of 1%-5% in 2013. However, volume growth will be weighed more toward the second half of the year due to difficult weather comparisons in the first quarter. The first quarter of 2012 benefitted significantly from favorable weather conditions.
Moreover, the company has limited visibility on growth in the demand for aggregates in public construction, including highways and other infrastructure projects. 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.
Accordingly, the volumes might still be sluggish in the first quarter of 2013 (due to difficult year ago comparisons) which could continue to hurt the top line. However, profits may show some improvement as a result of Vulcan’s cost reduction initiatives and price increases.
Earnings Whispers?
Our proven model does not conclusively show that Vulcan is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here, as you will see below.
Negative Zacks ESP: The Earnings ESP is -10.81%.
Zacks Rank #3(Hold): Vulcan’s Zacks Rank #3 (Hold) lowers the predictive power of ESP because the Zacks Rank #3 when combined with a negative ESP makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some building materials/ housing companies you may want to consider, as our model shows they have the right combination of elements to post an earnings beat in the next quarter:
TexasIndustries Inc (TXI), with an Earnings ESP of +67.74% and a Zacks Rank #2 (Buy)
Ryland Group Inc. (RYL), with an Earnings ESP of +25.93% and a Zacks Rank #1 (Strong Buy)
PulteGroup, Inc. (PHM), with an Earnings ESP of +25.0% and a Zacks Rank #2 (Buy)
Read the Full Research Report on PHM
Read the Full Research Report on VMC
Read the Full Research Report on TXI
Read the Full Research Report on RYL
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