Vulcan Materials Company VMC recently announced the pricing of unsecured senior notes worth $400 million. The notes carry an interest rate of 4.50% and are due in 2025. The transaction is expected to close on Mar 30, 2015, subject to necessary regulatory approvals.
The expected net proceeds from this offering are $395 million. The company expects to use the proceeds to redeem some of its previous debts. This includes the redemption of 6.40% notes worth $219 million on Apr 9, 2015 due 2017, which the company announced last week.
The company will also use the proceeds to fund a partial tender offer for its 7.00% notes due 2018 and redeem 6.50% notes worth $125 million due 2016 and 8.85% notes worth $6 million due 2021. The proceeds will also prepay floating rate notes worth $14 million due 2022.
This construction materials company has been displaying its liquidity prowess of late. Proceeds from the sale of non-core assets, a reduction in debt and increased earnings from the Profit Enhancement Plan have significantly strengthened Vulcan’s balance sheet.
Moreover, in mid-Feb 2015, Vulcan Materials raised its quarterly dividend from 6 cents per share to 10 cents, an increase of around 67%. This amounts to an annual dividend of 40 cents and an annual yield of 0.5%. (Read: Vulcan (VMC) Hits 52-Week High on Solid Q4; Dividend Hike.) In Feb 2014, the company raised its quarterly dividend by 400%.
Vulcan is witnessing a sharp increase in aggregates demand as construction activity continues to improve in Vulcan’s served markets. Both residential housing starts as well as non-residential contract awards have improved steadily in 2014 and so far in 2015 due to job growth, more attractive lending standards and general economic recovery.
With an improvement in the economy and job scenario, non-residential construction and housing are expected to show further strength in 2015, which should result in higher demand for Vulcan’s products.
Vulcan Materials Company carries a Zacks Rank #2 (Buy).
Other Stocks to Consider
Other stocks in the building and related sector worth considering include Trex Co. Inc. TREX, Graña y Montero SAA GRAM and Quanex Building Products Corporation NX. While Trex and Quanex Building Products sport a Zacks Rank #1 (Strong Buy), Graña y Montero has the same Zacks Rank as Vulcan Materials.
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