A month has gone by since the last earnings report for Vulcan Materials (VMC). Shares have lost about 1.6% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Vulcan due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Vulcan Materials' (VMC) Q1 Earnings & Revenues Beat Estimates
Vulcan Materials Company reported solid first-quarter 2019 results, wherein both the top and bottom lines surpassed the Zacks Consensus Estimate. Also, earnings and revenues improved year over year, given broad-based shipment growth, price improvements and operating efficiencies in aggregates business. Also, robust growth in public construction demand and continued improvement in private demand added to the positives.
The company, which is one of the largest producers of construction aggregates, reported adjusted earnings of 46 cents per share, surpassing the consensus mark of 33 cents by 39.4%. Total revenues of $996.5 million outpaced the consensus mark of $910 million by 9.5%.
On a year-over-year basis, its top line improved 16.6% and bottom line grew 4.6%.
Segments in Detail
Revenues from the segment increased 19.3% year over year to $835 million. Freight-adjusted revenues rose 18.7% from the prior-year quarter to $628.6 million. The bottom-line growth was mainly driven by strength in backlogged project work, and increased demand and customer confidence.
Aggregate shipments (volumes) were up 12.6% year over year, reflecting solid underlying demand and pent-up demand. However, shipments in California decreased due to heavy rainfall throughout the quarter.
Gross profit of $186 million was up 25% year over year. Also, gross margin (as a percentage of segment sales) expanded 100 bps, backed by solid growth in shipments and price improvements.
Asphalt, Concrete and Calcium
Revenues from the Asphalt Mix segment were $132.1 million, up 27.2% year over year. However, the segment recorded a gross loss of $3.3 million versus the year-ago quarter’s profit of $2.5 million due to lower material margins. Asphalt mix selling prices increased 5% or $2.73 per ton from the prior-year quarter.
Unit cost of liquid asphalt, which recorded a 29% year-over-year increase, was relatively stable throughout the quarter on a monthly basis. Nonetheless, price increase is expected to gradually offset the increased costs in 2019.
Total revenues from the Concrete segment were $83.6 million, down 16.7% year over year. Moreover, gross profit totaled $8.6 million, down 17% year over year. Also, same-store shipments were down 10% year over year due to wet weather in Virginia markets.
Total revenues from the Calcium segment were down 0.5% from the prior-year figure to $2 million. The segment reported gross profit of $0.67 million versus $0.55 million in the prior-year quarter.
Selling, Administrative and General or SAG expenses were $90.3 million, increasing 15.3% year over year. Moreover, as a percentage of revenues, the metric improved 10 bps. Adjusted EBITDA was up 15% year over year to $193 million, driven by strong shipments and pricing.
As of Mar 31, 2019, cash and cash equivalents were $30.8 million, down from $40 million at the end of 2018, as well as $38.1 million recorded in the comparable year-ago period.
In first-quarter 2019, Vulcan Materials returned $41 million to its shareholders, 10% higher than the prior-year period, through dividends. At the end of the quarter, total debt amounted to $3 billion, or 2.6 times of the trailing 12-month adjusted EBITDA.
2019 Guidance Reiterated
Vulcan Materials expects double-digit earnings growth in 2019. The company also expects solid growth in private and public demand. Above-average demand growth in Vulcan markets compared with the rest of the United States supports its shipment growth guidance.
The company expects aggregates shipment growth of 3-5% for the year. Aggregates freight-adjusted price is expected to increase 5-7% from a year ago.
Its earnings from continuing operations for the full year are expected within $4.55-$5.05 and adjusted EBITDA is projected in the range of $1.250-$1.330 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
Currently, Vulcan has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Vulcan has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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