Why Is Vulcan (VMC) Down 0.1% Since Last Earnings Report?

A month has gone by since the last earnings report for Vulcan Materials (VMC). Shares have lost about 0.1% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important drivers.

Vulcan’s Q4 Earnings & Revenues Beat Estimates

Vulcan Materials Company reported fourth-quarter 2018 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate, and also improved year over year, given above-average increase in public as well as private construction demand in the markets served by the company.

The nation's largest producer of construction aggregates reported adjusted earnings of 99 cents per share in the fourth quarter, surpassing the consensus mark of 87 cents. The bottom line also increased about 33.8% on a year-over-year basis.

Total revenues of $1.09 billion outpaced the consensus mark of $1.08 billion. The top line also increased 11.3% from the prior-year quarter.

Segments in Detail

Aggregates

Revenues from the segment increased 13.6% year over year to $874 million. Freight-adjusted revenues rose only 2% to $657.6 million as it was negatively affected by strong shipment growth in relatively lower-priced markets such as Alabama, Arizona and Illinois.

Aggregate shipments (volumes) were up 8% year over year, reflecting solid underlying demand, except in a few markets that were impacted by severe weather. Many of the markets were impacted by Hurricane Michael. Extreme wet weather in Texas and a number of Southeastern markets also impacted shipments.

Despite weather-related woes in key markets and a 17% increase in unit cost of diesel fuel, gross profit amounted to $256.4 million, up 24% year over year.

Non-Aggregates

Revenues in the Asphalt Mix segment were $185.8 million, up 15.7% from the prior-year quarter. However, the segment’s gross profit was $6.6 million, down from $22.9 million recorded a year ago due to lower material margins. Asphalt mix selling prices increased 7% or $3.74 per ton from the prior-year quarter. However, a 54% increase in unit cost of liquid asphalt more than offset the price increases.

Total revenues in the Concrete segment were $92.6 million, down 14.5% year over year. Gross profit was $11.8 million, up 1.8% year over year. However, same-store shipments were down 7% year over year due to wet weather in Virginia and Texas markets.

Total revenues in the Calcium segment were $2 million, down 2.9% from the prior-year quarter. The segment reported gross profit of $0.48 million versus $0.5 million in the prior-year quarter.

Operating Highlights

Adjusted EBITDA was up 22.5% year over year to $285.6 million.

Selling, Administrative and General or SAG expenses were $84.4 million, down 1.7% year over year. As a percentage of revenues, the same improved 100 bps.

2018 Highlights

Adjusted earnings came in at $4.05 per share, increasing from $3.04 a year ago and  surpassing the consensus mark of $3.93. Total revenues of $4.38 billion were up from $3.89 billion in 2017 and exceeded analysts’ expectation of $4.37 billion. Notably, aggregates shipments advanced 10% (6% on a same-store basis) from a year ago, led by double-digit growth in Alabama, Arizona, Florida, Illinois, Tennessee and Texas.

Adjusted EBITDA of $1.13 billion increased 15.3% year over year.

Financials

As of Dec 31, 2018, cash and cash equivalents were $40 million, down from $141.6 million at the end of 2017.

In 2018, Vulcan returned $282 million to its shareholders (compared with $193 million in the prior year) through dividends and share repurchases. At 2018-year, total debt amounted to $2.9 billion, or 2.6 times full-year Adjusted EBITDA compared with 2.9 times at the end of the prior year.

2019 Guidance

Vulcan expects double-digit earnings growth in 2019. The company also expects solid growth in private as well as 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.

Full-year earnings from continuing operations are expected within $4.55-$5.05 per share 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. The consensus estimate has shifted -21.83% due to these changes.

VGM Scores

At this time, Vulcan has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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 #3 (Hold). We expect an in-line return from the stock in the next few months.

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