On Mar 4, 2014, shares of Vulcan Materials Company (VMC) reached a 52-week high of $69.50, on the back of solid fourth quarter 2013 earnings results and dividend hike. The company eventually closed at $69.01, representing a year-to-date return of around 32.6%.
Share Price Drivers
Share price of Vulcan Materials has been gaining momentum since the release of its fourth quarter 2013 results on Feb 6. The share price was also driven by the recent hike in dividend.
This Zacks Rank #2 (Buy) company reported earnings of 8 cents per share in the fourth quarter of 2013 surpassing the Zacks Consensus Estimate of a loss of 3 cents per share. Fourth quarter earnings were a significant improvement over the prior-year quarter earnings of 3 cents per share.
Total revenue of $680.3 million beat the Zacks Consensus Estimate of $637 million by 6.8%. Total revenue increased 11.8% from the prior-year quarter owing to pricing gains and volume growth in most of the segments.
The company benefited from improved product demand owing to broad based recovery in private construction activity, especially residential. Encouragingly, most of the volume and pricing increase was noted in the Aggregates.
Aggregates segment revenues rose 11.5% year over year in the quarter owing to gains from price increases and volume growth. Aggregates shipments (volumes) rose 7.0% year over year in the quarter, while average sales price increased 3.5% due to improvement in most markets.
On Feb 14, 2014, the board of directors announced a 400% increase in its quarterly dividend. The largest producer of construction aggregates in the U.S. will now pay a quarterly dividend of 5 cents per share in 2014, much higher than 1 cent paid in 2013. The increased dividend indicates the company’s solid cash position.
Vulcan has been divesting its non core assets in order to focus its resources on the higher-growth Aggregates business. Apart from improving the core aggregates asset portfolio, the proceeds from these transactions strengthen Vulcan Materials’ balance sheet. Vulcan is well positioned amid the growing momentum of the housing market.
Other Stocks to Consider
Investors interested in the building materials sector can also consider stocks like CaesarStone Sdot-Yam Ltd. (CSTE), Quanex Building Products Corporation (NX) and USG Corporation (USG). While Sdot-Yam carries a Zacks Rank #1 (Strong Buy), Quanex Building and USG Corp. have a Zacks Rank #2.
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