Earnings Preview: Vulcan Materials - Analyst Blog
May 03 2011 - 10:09AM
Zacks
Vulcan Materials
Company (VMC) announced that it would
release its results for the first quarter of 2011 after the market
closes on May 4, 2011. Alabama-based Vulcan Materials realized a
loss of 36 cents per share in the fourth quarter from continuing
operations, deteriorating significantly from the Zacks Consensus
Estimate of a loss of 19 cents per share.
In the
upcoming quarter, the Zacks Consensus Estimate for Vulcan Materials
is pegged at a loss of 49 cents per share, reflecting an annualized
decline of 39%. The upside potential of the estimate, essentially a
proxy for future earnings surprises, is
22.45%.
With respect
to earnings surprises, the company negatively outdid the Zacks
Consensus Estimate in the trailing four quarters. This is reflected
in the average earnings surprise of 63.01%, with substantial
negative surprises in each of the last three quarters
involved.
Fourth Quarter
Review
Vulcan
Materials’ net loss widened to $46 million or $0.36 per share in
the fourth quarter of 2010 from $12.6 million or $0.10 per share a
year ago. The loss per share for the quarter far exceeded the Zacks
Consensus Estimate of a loss of $0.17 per share.
Total
revenue dropped marginally to $586.2 million from $590 million in
the fourth quarter of 2009. The decline was attributable to a
decrease in freight-adjusted selling price along with a fall in
shipments in North Carolina, Georgia and Florida, despite a
stronger demand from public infrastructure projects in Texas,
Virginia and South Carolina regions.
Net sales
from the Aggregates segment were $362.6 million, down 2% from
$369.1 million. Demand for aggregates remained almost stable but
freight-adjusted unit selling price went down to $9.95 from $10.39
in the prior year. Consequently, segment earnings for aggregates
decreased to $58 million from $70 million during the prior-year
quarter.
Net sales in
the Concrete segment slid slightly to $90.1 million from $90.7
million in the previous year, due to lower average selling prices,
offset partly by higher shipments and lower unit cost of sales.
Segment loss was $13 million versus $15 million last
year.
The Asphalt
Mix segment reported a marginal decline in net sales to $87.6
million from $87.7 million in the fourth quarter of 2009. The
segment was favorably impacted by a 2% rise in selling prices for
asphalt mix, more than offset by a 14% increase in liquid asphalt
cost and a 4% decrease in asphalt volumes. Segment earnings in
asphalt were $8 million compared with $10 million in the prior
year's quarter.
Revenues in
the Cement segment improved 18% to $19 million from $16.1 million a
year-earlier due to a 43% increase in shipments, offset partly by a
22% fall in average selling price. Segment loss in the quarter was
$1 million led by lower selling prices.
Vulcan
Materials’ cash and cash equivalents improved to $48.09 million as
of December 31, 2010 from $22.3 million at the end of the
prior-year period. However, long-term debt rose to $2.43 billion as
of the above date from $2.12 billion a year ago. Net cash generated
by operating activities decreased to $202.7 million in 2010 from
$453 million in 2009.
Vulcan is
optimistic about 2011. The company expects improvements in each of
its operating segments during the year. It forecasted a stable
demand outlook along with a 1%-3% hike in the price of aggregates.
Further, the company’s selling, general and administrative expenses
in 2011 are expected to be $305 million and capital spending to be
$125 million for the year.
Estimate Revisions
Trend
The first
quarter 2011 estimate remained unchanged at a loss of 49 cents per
share. The evidence of sluggish growth in the U.S. construction
industry keeps the analysts cautious about the stock.
Agreement of Estimate
Revisions
No upward or
downward revision of estimates has been made in the last 30 days by
any of the 13 analysts covering the stock for the first quarter of
2011. The analysts seem to be extra cautious on the stock given the
macro economic conditions in the U.S. and the growing competition
in the industry.
Magnitude of Estimate
Revisions
Following
the fourth quarter earnings release in February, the quarterly
earnings per share were projected to be a loss of 46 cents per
share. However, in the last 60 days, the estimate had been revised
downward to a loss of 49 cents per share. Again, estimate dropped
by one penny to a loss of 50 cents per share in the last 30 days.
However, this recovered to a loss of 49 cents in the last 7
days.
Our
Take
The
construction industry in the U.S. (both residential and industrial)
will either witness a lack of growth or sluggish growth during
2011, thereby leaving little scope for the building materials
industry to make improvements.
Secondly,
increasing competition from other material suppliers namely
Cemex
(CX) ,
Lafarge
(LFRGY) and
Martin Marietta Materials
Inc. (MLM) may pose additional
problems for the company by capturing a portion of its
potential markets.
However, being the nation’s largest producer of construction
aggregates and a leading producer of other construction materials,
Vulcan Materials is expected to overcome the hurdles and the
possible business threats to retain its market position. A
diversified customer base and increased demand from public
infrastructure projects in a number of crucial markets are the
positive signs for Vulcan.
We give Vulcan shares a Neutral recommendation in the long
term.
CEMEX SA ADR (CX): Free Stock Analysis Report
LAFARGE SA-ADR (LFRGY): Free Stock Analysis Report
MARTIN MRT-MATL (MLM): Free Stock Analysis Report
VULCAN MATLS CO (VMC): Free Stock Analysis Report
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