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Vulcan's (VMC) Q3 Earnings & Revenues Top Estimates, Margins Up

Vulcan Materials Company VMC reported stellar results for the third quarter of 2023, surpassing the Zacks Consensus Estimate for both earnings and revenues. The company experienced solid growth in both its top and bottom lines compared to the previous year. This performance can be attributed to the consistent strategic execution and the strong performance of its aggregates-led business. Additionally, large industrial projects contributed to their better-than-expected results.

Shares of the nation’s largest producer of construction aggregates declined 2.4% on Oct 26 post the earnings release.

Inside the Headlines

Adjusted earnings per share (EPS) of $2.29 topped the consensus mark of $2.24 by 2.2% and increased 28.7% from the year-ago level of $1.78.

Total revenues of $2,185.8 million surpassed the consensus mark of $2,177 million by 0.4% and increased 4.7% year over year.

Vulcan Materials Company Price, Consensus and EPS Surprise

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

Segments in Detail

Aggregates

Revenues from the segment increased 9.1% year over year to $1,626.1 million due to higher pricing, wherein our model expected the segmental revenues to grow 7.4% year over year to $1,601.2 million. Aggregate shipments (volumes) declined 2% year over year, with variations observed across different geographic regions. The growth in shipments in specific Southeastern markets was sustained by robust industrial project activity, thereby mitigating the effects of declining residential demand.

Freight-adjusted average sales price rose 15% to $19.29 per ton year over year. Freight-adjusted revenues rose 12.4% from the prior-year quarter to $1,233.5 million. Solid operational execution helped mitigate continued year-over-year inflationary pressure. Effective pricing actions resulted in accelerated growth.

Gross profit of $508.4 million increased 16.6% from the prior year’s levels despite lower shipments. Gross margin expanded 200 basis points (bps) owing to solid pricing and higher efficiencies.

Asphalt, Concrete and Calcium

Revenues from the Asphalt segment were $347.2 million, up 11.9% year over year. This segment’s reported figure exceeded our prediction of $295.5 million, which suggested a 4.7% decline from the prior year. The segment generated a gross profit of $55.9 million, up from $29.5 million a year ago. Shipments registered a substantial increase of 11%, driven by robust growth across the geographies. The year-over-year improvement in earnings was also influenced by modest price increases and reduced liquid asphalt expenses. Asphalt pricing was up 1.9%.

Total revenues from the Concrete segment were $364.6 million, down 19.1% year over year. Our model predicted segment sales to be $406.5 million (down 9.8% year over year). Gross profit totaled $26 million, almost in line with the year-ago level of $26.5 million. Shipments fell 27.6% year over year, but average selling prices increased 10.7% to $169.98 per cubic yard from the prior-year level. The third-quarter shipments were influenced by two main factors: firstly, the impact of divesting the company's operations in New York, New Jersey, and Pennsylvania in the previous year, and secondly, the timing of large projects in the prior year.

Total revenues from the Calcium segment increased to $2.3 million from the prior-year figure of $2.1 million. The company reported below our expectation of $2.7 million, which predicted growth of 26.2% year over year. The segment reported a gross profit of $0.7 million, down from $0.8 million a year ago.

Operating Highlights

Selling, administrative and general expenses — as a percentage of total revenues — increased 10 bps to 6.6% from a year ago. Adjusted EBITDA was up 18.7% year over year to $602 million.

Financials

As of Sep 30, 2023, cash and cash equivalents were $340 million, up from $161.4 million at 2022-end. Long-term debt was $3,874.3 million at the third quarter of 2023-end, almost in line with $3,875.2 million at 2022-end.

In the first nine months of 2023, capital expenditures were $411 million. On Sep 30, 2023, total debt to trailing-12-months adjusted EBITDA was 2.0x, down from 2.6x from the year-ago quarter. Return on average invested capital was 15.4%, up from 13.6% a year ago on a trailing 12-month basis.

2023 Guidance

For 2023, the company now anticipates adjusted EBITDA in the range of $1.95-$2 billion (up 21% at the mid-point of the guided range) versus $1.9-$2 billion expected earlier.

In 2023, the company expects capital expenditures of $600-$650 million.

Zacks Rank & Recent Construction Releases

VMC currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Otis Worldwide Corporation OTIS reported impressive results in third-quarter 2023. Its earnings and net sales surpassed the Zacks Consensus Estimate and rose on a year-over-year basis. Its quarterly results reflected 12 consecutive quarters of organic sales growth and solid operating margin expansion, contributing to high-teens adjusted EPS growth.

OTIS reported quarterly EPS of 95 cents, increasing 18.8% from the year-ago quarter’s figure of 80 cents. Net sales of $3.52 billion rose 5.4% on a year-over-year basis.

Watsco, Inc. WSO reported better-than-expected third-quarter 2023 results, with earnings and revenues topping the Zacks Consensus Estimate.

Watsco delivered record sales and EPS, driven by solid HVAC equipment sales growth, improved residential unit volumes and strong price realization. Also, the commercial end markets remained healthy in the quarter.

Armstrong World Industries, Inc. AWI reported better-than-expected results for third-quarter 2023, wherein earnings and net sales topped the Zacks Consensus Estimate. Also, both metrics increased on a year-over-year basis.

Despite the challenging macroeconomic conditions, AWI delivered strong results attributable to its diversified end markets, consistent Mineral Fiber average unit value growth and appealing growth initiatives.

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