Vulcan Downgraded to Underperform - Analyst Blog
August 16 2011 - 7:30AM
Zacks
We have
downgraded our recommendation on Vulcan Materials
Company (VMC) to Underperform from Neutral. Based in
Birmingham, Alabama, Vulcan Materials is engaged in the production,
distribution and sale of construction aggregates, and other
construction materials and related services in the U.S. and Mexico.
It is the nation’s largest producer of construction aggregates and
a leading producer of other construction materials.
Vulcan Materials released its second quarter earnings on August
02, 2011. The company posted adjusted earnings of $9 million or 7
cents per share from continuing operations compared with $5 million
or 3 cents per share in the year-ago quarter.
Net sales dropped 5.1% to $657.5 million from $692.8 million in
the corresponding quarter of 2010. The year-over-year decline was
primarily attributed to lower-than- expected demand, bad weather in
April, partly offset by stronger demand for public infrastructure
projects in some markets and price rise across all the
segments.
Despite
increased earnings in the most recent quarter, the company may see
reduced earnings in the near future given the rising costs of
certain essential materials along with the soaring prices of diesel
fuel. The price rise for necessary resources is expected to
continue, and raising the prices of products may not be enough to
fully offset the inflationary effects in the near
future.
Secondly,
the growing competitive pressure is a major threat to Vulcan’s
business. Although it is the nation’s largest supplier of
construction materials, other companies are growing faster and
capturing Vulcan’s market share, including CEMEX,
S.A.B. de C.V. (CX), Lafarge S.A.
(LFRGY), Cement Roadstone Holdings and Martin Marietta
Materials Inc. (MLM).
Moreover, Vulcan generated only $7 million of cash from
operating activities in the first six months of 2011 compared with
$18.7 million in the year-ago period. This decrease was largely
driven by an unfavorable variance in trade payables and accruals.
Accordingly, the company’s working capital has been reduced to
($44.5) million at the end of the second quarter in 2011. This
deterioration in the balance sheet may restrict the company’s
future investment plans.
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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