Vulcan Materials Company’s VMC second-quarter 2015 adjusted earnings of 66 cents per share came in line with the Zacks Consensus Estimate. Adjusted earnings increased a massive 83.3% from the prior-year quarter’s adjusted earnings of 36 cents per share on the back of higher revenues and improved margins.
The figure was derived after adjusting debt refinancing charges, business development expenses and restructuring costs.
Despite extremely humid weather in April and May, total revenue of $895 million surpassed the Zacks Consensus Estimate of $865 million by 3.5%. Sales increased 13% from the prior-year quarter owing to strong demand for construction activities across the markets served by the company and increasing pricing momentum in the aggregates segment.
Adjusted gross margin of 30.9% increased 460 basis points (bps).
Adjusted EBITDA soared 33% year over year to $229 million driven by strong earnings growth in aggregates and improved earnings from all non-aggregates segments.
Segment Details
Aggregates
Revenues rose 16.6% year over year to $733.4 million owing to higher shipments. Freight-adjusted revenues increased 15% year over year to $558 million.
Aggregates shipments (volumes) rose 9% year over year driven by strong private and public demand in the end markets. However, volume was hurt by unfavorable weather in major markets and historically low consumption levels.
Same-store aggregate shipments increased 5.4% year over year. On a same-store basis, aggregate shipment increased 5% and 2% in April and May, respectively due to humid weather conditions. However, same-store shipments rose to 9% in Jun 2015.
Freight-adjusted average sales price increased 6.4% on a same-store basis, driven by price increases in most of the markets, partially offset by an unfavorable product mix in key markets, particularly Virginia.
Aggregates segment gross profit margin of 37.1% increased 370 bps during the quarter. Aggregate segment cash gross profit of $264.3 million increased 21%.
Non-Aggregates
Adjusted total revenue in the Concrete segment was $78.6 million, down 16.2% year over year owing to soft volumes. On a same-store basis, segment volume declined 5% year over year owing to humid weather in Virginia and Texas. However, prices increased 7.1% year over year. Adjusted gross profit of $4.9 million improved 53% from the year-ago quarter due to pricing gains.
Revenues in the Asphalt Mix segment were $129 million, up 18% year over year on the back of an 8% increase in same-store volume and price hikes of 1.3%. Gross profit of $21.1 million was up from $9 million in the prior-year quarter, due to efficient management of material margins and volume growth.
Adjusted total revenue in the Calcium segment (formerly Cement) was $2.4 million, up from $2.2 million in the prior-year quarter. The segment posted adjusted gross profit of $1.1 million, up from $0.8 million in the prior-year quarter.
Vulcan Materials exited the Cement business with the sale of the Florida facilities in Mar 2014. The company, however, retained the calcium operation at the Brooksville, FL facility and renamed the segment as Calcium. The Florida calcium facility mines, produces and sells calcium products.
During the second quarter of 2015, the company acquired three aggregates facilities and 7 ready-mixed concrete facilities in Arizona and New Mexico for about $21 million.
2015 Outlook
Based on the current market situation, the company continues to expect adjusted EBITDA in the range of $775 to $825 million in 2015, higher than the 2014 levels, to be driven by improvement in both aggregates pricing, better profits in the non-aggregates segments and lower costs.
The company expects aggregate pricing to continue increasing, with more aggressive hikes in the second half of 2015. However, extreme humidity in April and May delayed the work schedule, which is expected to hurt volumes in the upcoming quarters.
Vulcan Materials sports a Zacks Rank #4 (Sell).
Key Picks from the Sector
Stocks in the building/construction sector that are worth considering include U.S. Concrete, Inc. USCR, Rayonier Inc. RYN and Universal Forest Products Inc. UFPI. While U.S. Concrete and Rayonier sport a Zacks Rank #1, Universal Forest Products carries a Zacks Rank #2 (Buy).
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