Note: More details to come; changes are highlighted. Except where highlighted, no other sections of this report have been updated.
Reason for Report: Flash Update: 2Q13 Earnings Results
Prev. Ed.: Jul 04, 2013; 1Q13 Earnings Update (broker material considered till May 22)
Note: The tables below for Revenue, Margins, and Earnings per Share contain fewer brokers’ material than that used in the Valuation table. The extra figures in the Valuation table come from reports that did not have accompanying spreadsheet models.
Vulcan Misses Q2 Earnings, Beats Revs– Aug 01, 2013
Vulcan Materials Company’s adjusted earnings of $0.13 in the second quarter of 2013 lagged the Zacks Consensus Estimate of $0.14 per share by 7.14%. The adjusted earnings per share improved significantly from prior year quarter loss of $0.02 on the back of solid revenue increase in most of the segments.
Reported earnings in the quarter were $0.23 per share, significantly better than the prior-year quarter loss of $0.13.
Total revenue of $738.7 million however surpassed the Zacks Consensus Estimate of $706 million by 4.6%. Total revenue increased 6.4% from the prior-year quarter owing to pricing gains and volume growth in most of the segments excluding asphalt mix.
Most of the volume and pricing increase was noted in the aggregates segment. The top line benefited from broad based recovery in private construction activity, especially residential. Total revenue comprised $696.1 of net sales and $42.7 million of delivery revenues.
Gross profits grew 25.5% to $132.9 million in the quarter due to solid revenue increase. Excluding gains on the sales of assets, restructuring cost and exchange offer costs, adjusted EBITDA was $141.2 million, up 10.9% from the prior-year quarter. Selling, general and administrative (SG&A) costs rose 4.8% from the prior-year quarter to $64.9 million.
Revenues rose 7.4% to $464 million (including inter-segment sales) in the quarter owing to gains from price increases and volume growth. Aggregates shipments (volumes) rose 2.0% year over year in the quarter, despite unfavorable weather in eastern United States. Average sales price increased 4% due to improvement in most markets.
The company is witnessing a growing demand for private construction, including residential housing starts and contract awards for non-residential buildings, following a steady recovery in the overall housing industry. Due to growth in private construction activity, Vulcan saw more than 50% increase in shipment in the states of Arizona and Florida. Double-digit increase in shipment was also witnessed in Texas, central Gulf Coast, North Carolina and California.
Revenues of the Concrete and Cement segment witnessed a year-over-year increase on the back of volume growth and price increase. The Asphalt segment witnessed a decline in revenues during the second quarter of 2013 due to weak volume and price dip.
The company reported cash and cash equivalents of $87.0 million as of Jun 30, 2013, compared to $188.1 million as of Mar 31, 2013.
With the housing market gaining momentum, demand for Vulcan’s products, both aggregates as well as non-aggregates, is improving. The company expects earnings to improve in 2013 on the back of pricing growth, funding stability, aggressive cost control and volume increase.
Aggregates: Private construction demand is expected to grow. Though the number of large highway and industrial projects are expected to grow with increased funding certainty from the new highway bill, the timing of these projects is difficult to predict.
Aggregates shipments are expected to grow in the range of 2%-4% in the second half of 2013. However, volume growth is expected to be weighted more toward the second half of the year due to difficult weather comparisons in the year-ago quarter. The company expects 4% increase in pricing in 2013.
Non-Aggregates: The company expects earnings to improve in all the three non-aggregates segments in 2013. While Concrete volumes and material margins are expected to gain from improving housing starts, Cement earnings are expected to get a boost from higher shipment and pricing and also lower production costs.
Details, other news update and broker comments will be provided in the next edition.
Portfolio Manager Executive Summary
Vulcan Materials Company is the largest producer of construction aggregates like crushed stone, sand and gravel in the U.S. In the U.S., Vulcan serves both the private and public sectors.
Out of the 10 firms covering the stock, 7 firms provided a neutral rating, while 3 firms rendered a positive rating. None of the firms rated the stock negatively.
Neutral or equivalent outlook (7/10 firms): The firms with a neutral outlook appreciate the company’s cost control strategies in the quarter. However, they prefer to stay on the sidelines as they are concerned about the poor volumes the aggregate segment and rising input costs.
Positive or equivalent outlook (3/10 firms): The bullish firms believe that the company will benefit from the recovery of the private construction market and increased funding certainty from the new highway bill. They are optimistic about the increased pricing in the Aggregate segment for the past two quarters.
Jul 4, 2013
Based in Birmingham, Ala., Vulcan Materials Company 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. The company has four operating segments going by the principal product lines: Aggregates, Concrete, Asphalt mix and Cement.
The analysts have identified the following factors for evaluating the investment merits of Vulcan Materials Company:Key Positive Arguments / Key Negative Arguments
Vulcan is the largest supplier of aggregates in the United States. / Rise in cost of energy and raw materials are hurting margins.
Vulcan aggressively pursues profitable growth opportunities through the extension of its existing product lines, addition of new products and acquisitions. / Volumes at the Aggregate segment have been weak for the past few quarters.
The company’s diverse footprint offers long-term infrastructure expansion and other construction opportunities in key U.S. states, particularly in an industry with escalating barriers to entry.
The Congress recently passed the highway bill, which will ensure funding for public sector infrastructure programs in the years to come. This will increase demand for highway construction and is expected to benefit Vulcan’s business in the near future.
Further information on the company is available at its website: http://www.vulcanmaterials.com.
NOTE: Vulcan’s fiscal year coincides with the calendar year.
Jul 4, 2013
Vulcan is one of the largest producer of construction aggregates in the U.S. and a leading producer of other construction materials. The company has specific business strategies to drive its long term growth.
The company intends to focus on its aggregate business by building and maintaining adequate reserves. The company intends to expand its coast to coast footprint, thereby increase its presence in the fast growing metropolitan areas. The company also believes in growing through acquisitions and mergers.
The company focuses on reducing controllable costs and maximizing operating efficiency across the organization to generate higher levels of earnings and cash flow in the long run. In Feb 2012, the company announced two initiatives, a Profit Enhancement Plan (PEP) and planned asset sales in order to improve earnings and cash flow, pay off debts, and thereby strengthen its overall credit profile.
The PEP plan is designed to reduce costs as well as enhance profitability by streamlining management structure. The plan is expected to improve earnings before interest, taxes, depreciation and amortization (EBITDA) by $100 million annually by 2014 at current volumes.
Under the planned assets sale, the company intends to divest its non-core assets (ready-mix concrete and cement operations, non-strategic aggregates assets and real estate) in order to focus on the higher-growth Aggregates business. These sales are expected to generate after-tax net proceeds of $500 million and improve the company’s liquidity position and earnings.
A new multi-year highway bill was recently passed by the Congress in Jun 2012 (MAP-21) that took effect on Oct 1, 2012. The bill intends to provide the state transport departments with funding certainty, thus encouraging them to proceed with their infrastructure programs.
Jul 4, 2013
Provided below is a summary of target price/valuation as compiled by Zacks Digest:Rating Distribution
Positive / 30.0%↓
Neutral / 70.0%↑
Negative / 0%
Avg. Target Price / $54.83↑
Digest High / $63.00
Digest Low / $45.00
No. of Analysts with Target price/Total / 6/ 10
Risks to the target price include the following: transportation delays or strikes, unfavorable weather, seasonality of the construction sector, rising input costs, construction delays and availability of funds.
Vulcan Posts Wider 1Q Loss – May 02, 2013
Vulcan Materials Company posted net loss of $0.42 per share in the first quarter of 2013, wider than the year-ago quarter loss of $0.40 per share.
Excluding the impact of gains on sale of real estate and businesses and restructuring charges, the adjusted loss was $0.48, wider than the Zacks Consensus Estimate of a loss of $0.36 per share for the quarter and the prior-year loss of $0.41.
Total revenue of $538.2 million surpassed the Zacks Consensus Estimate of $514 million by 4.7%. Total revenue also increased 0.4% from the prior-year quarter, driven by price increase in the aggregates segment and volume growth in ready mix concrete and cement.
Top-line growth mostly benefited from the increase in private construction activity, especially residential. Total revenue comprised $504.6 of net sales and $33.6 million of delivery revenues.
Adjusted EBITDA was $26.0 million, down 44.7% from the prior-year quarter. Selling, administrative and general (SAG) costs declined 0.3% from the prior-year quarter to $64.7 million attributable to Vulcan’s cost saving efforts.
With the housing market gaining momentum, demand for Vulcan’s products, both aggregates as well as non-aggregates, is improving. As such, the company expects earnings to improve in 2013 on the back of pricing growth, funding stability, aggressive cost control and volume increase.
Vulcan reported total revenue of $538.2 million in 1Q13, up 0.4% y/y, as pricing increase in the aggregates and cement segment and volume growth in ready-mixed concrete and cement were mostly offset by significant decline in aggregate volume and flat pricing of ready-mixed concrete and asphalt mix.
Total revenue comprised net sales and delivery revenues. Net sales were $504.6 million, up 1.0% y/y. Delivery revenues contributed $33.6 million to total revenue, down 6.7% y/y. The Zacks Digest average revenues were in line with the company results.
Provided below is a summary of total revenue as compiled by Zacks Digest:Total Revenue ($ in millions) / 1Q12A / 4Q12A / 2012A / 1Q13A / 2Q13E / 2013E / 2014E / 2015E
Digest High / $535.9 / $608.4 / $2,567.8 / $538.2 / $761.8 / $2,789.2↑ / $3,178.4↑ / $3,492.9↑
Digest low / $535.9 / $608.1 / $2,566.9 / $538.2 / $738.3 / $2,719.8↑ / $2,929.6↑ / $3,492.9↑
Digest Average / $535.9 / $608.4 / $2,567.3 / $538.2 / $750.2 / $2,762.4↑ / $3,065.3↑ / $3,492.9↑
Digest Average y-o-y growth / 10.0% / -1.0% / 0.1% / 0.4% / 8.1% / 7.6%↑ / 11.0%↑ / 13.9%
The construction Aggregates segment includes crushed stone, sand and gravel and recycled concrete. The segment serves markets in the U.S., the District of Columbia, the Bahamas and Mexico. The company also sells railroads ballast for construction and maintenance of railroad track and riprap and jetty stone for erosion control along waterways.
Revenues were $359.0 million in 1Q13, up 1.0% y/y, driven by 5.0% increase in aggregate pricing. Net sales were affected by a 5% decline in volume (shipments) and wet winter in comparisons with favorable weather conditions in the prior year quarter. The Zacks Digest average revenue was in line with the Aggregates segment results.
The company is witnessing a growing demand for private construction, including residential housing starts and contract awards for non-residential buildings, following a steady recovery in the overall housing industry. Due to growth in housing construction activity, Vulcan saw shipment growth in the states of Arizona, California, North Carolina and Florida, with each state growing in double digits.
However, other markets, like Virginia, Tennessee and the Midwest, witnessed significant volume declines due to unfavorable weather and lesser number of projects than the prior-year quarter.
The Concrete segment deals with the production and sale of ready-mixed concrete and other products such as block, pre-stressed and pre-cast beams. The segment also resells purchased building materials related to the use of ready-mixed concrete and concrete block. This segment functions as a customer of the Aggregates segment as aggregates are a major component in ready-mixed concrete. The segment primarily serves the markets of California, Florida, Georgia, Maryland, Texas, Virginia and the District of Columbia.
Revenues in the Concrete segment were $99.9 million in 1Q13, up 8.0% y/y. Ready-mixed concrete volumes grew 6.0% on the back of improving private construction. The volume increase of ready mixed concrete was strongest in Florida and Texas, exceeding 20%. Average sales price of concrete was flat y/y. The Zacks Digest average revenues were in line with the Concrete segment results.
The Asphalt Mix segment produces and sells asphalt mix in Arizona, California and Texas.
Revenues in the Asphalt Mix segment were $67.3 million in 1Q13, down 5.7% y/y. Asphalt mix volume declined 4.0% from the prior year. Average sales price was flat y/y. The Zacks Digest average revenue was in line with Asphalt Mix segment results.
The Cement segment caters mainly to Vulcan’s Concrete segment. The cement production takes place solely in Florida at the Newberry, Brooksville and Tampa facilities.
Revenues in the Cement segment were $22.7 million (excluding intersegment sales), down 10.7%, despite increase in volume and prices. The Zacks Digest average revenue was in line with Cement segment results. Volumes grew 14.0% from the prior year period on the back of improving private construction. Prices increased 6.0% y/y.