Vulcan Materials Company VMC is set to report second-quarter 2015 results on Aug 4, before the market opens. Last quarter, the company delivered a positive earnings surprise of 5.88%.
In fact, the construction materials company has delivered positive earnings surprises in three out of the past four quarters with an average of 7.75%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Vulcan Materials has performed well in 2014 as well as in the first quarter of 2015 backed by strong volume trends in the core aggregates business and improved profitability. Solid trends in private construction activity supported by highway construction have been driving aggregate volumes.
Aggregates demand is expected to gain further strength as the year progresses as non-residential construction and housing gain momentum with improvement in the economy and job scenarios. Moreover, management expects to see further price improvement throughout 2015.
Further, stronger volumes, higher pricing and lower diesel fuel costs are fuelling profits. We expect the bullish sales and profit trend to boost the second-quarter results.
However, the expiration of the current federal highway in May creates uncertainty regarding highway funding.
Earnings Whispers
Our proven model does not conclusively show that Vulcan Materials is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.
Zacks ESP: The Earnings ESP is -6.06% as the Most Accurate estimate stands at 62 cents while the Zacks Consensus Estimate stands at 66 cents.
Zacks Rank: Vulcan Materials’ Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
Stocks to Consider
Some stocks in the broader food/beverage sector that have both a positive Earnings ESP and a favorable Zacks Rank are:
Lennar Corporation LEN, with an Earnings ESP of +1.27% and a Zacks Rank #1.
D.R. Horton, Inc. DHI, with an Earnings ESP of +8.47% and a Zacks Rank #1.
Louisiana-Pacific Corp. LPX, with an Earnings ESP of +30.0% and a Zacks Rank #3.
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