Why Is Valmont (VMI) Down 5.7% Since the Last Earnings Report?

A month has gone by since the last earnings report for Valmont Industries, Inc. VMI. Shares have lost about 5.7% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock’s next earnings release, or is it 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 catalysts.

Valmont's Q1 Earnings and Revenues Beat Estimates

Valmont posted a profit (on a reported basis) of roughly $39 million or $1.72 per share in first-quarter 2017, up 18.2% year over year from net earnings of around $33 million or $1.45, a year ago.

Barring one-time items, earnings came in at $1.68 per share for the reported quarter, up from $1.49 a year ago. The results topped the Zacks Consensus Estimate of $1.62.

Net sales for the quarter were $637.5 million, up 7% year over year, also beating the Zacks Consensus Estimate of $624 million. Revenues improved across all segments, led by a strong performance in Utility Support Structures Segment.

Segment Review

Broadly, the Omaha, NE-based company classifies its business segments as infrastructure- and agriculture-related.

Infrastructure-Related

Engineered Support Structures: The segment’s sales of $180.6 million for the reported quarter were 2% higher than the prior-year quarter, helped by improved global wireless communication product and intercompany sales. Sales of lighting and traffic products declined modestly in North America. Lighting and traffic structure sales in Europe mainly declined due to lower sales from export. In Asia-Pacific region, the sales of lighting and traffic products were comparable.

Utility Support Structure: Sales rose 21% year over year to $174.6 million, supported by utility reliability investments in the North American transmission grid, interconnecting regional transmission grids, renewable and a favorable sales mix.

Coatings: This segment saw net sales increase year over year by 7% to $73.5 million, supported by price increase to offset higher zinc cost. The sales volume improved as the quarter progressed.

Energy and Mining:  Net sales rose 8% to $78 million on gains across major product lines. Offshore wind structures and component sales offset increased on the back of continued development in Europe’s North Sea region. Sales in the non-traditional markets improved, offsetting weak demand for oil and gas exploration markets. Stronger commodity prices and improving construction market supported increased sales in Australia.

Agriculture-Related

Irrigation: The segment reported net sales of $167.2 million, up 6% year over year. Sales in the North American market increased modestly while international sales improved broadly on the back of a stronger Brazil market and favorable currency translations.

Financial Position

Valmont ended first-quarter 2017 with a cash balance of $425.2 million, up roughly 9.7% year over year. Long-term debt at the end of the quarter was $754.5 million, down around 0.3% year over year.

Outlook

According to Valmont's Chairman and CEO, Mogens C. Bay, the company is encouraged by improved demand in certain markets, substantiated by second straight quarter of improved sales. Reconfirming the earnings, sales and cash guidance for the year, the company acknowledged that volatility in the prices of certain raw materials and weak fundamentals in farm economy, could still impact some businesses.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There has been three downward revisions for the current quarter compared to one upward.

Valmont Industries, Inc. Price and Consensus

 

Valmont Industries, Inc. Price and Consensus | Valmont Industries, Inc. Quote

VGM Scores

At this time, Valmont's stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable for value and growth investors.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Notably, the stock has a Zacks Rank #2 (Buy). We are looking for an above average return from the stock in the next few months.

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