Vulcan Materials Company’s VMC third-quarter 2015 adjusted earnings of 95 cents per share came in line with the Zacks Consensus Estimate. Adjusted earnings increased a massive 76% from the prior-year quarter figure of 54 cents per share on the back of higher revenues, lower taxes and improved margins.
The figure was derived after adjusting acquisitions, divestures and restructuring costs.
Total revenue of $1.04 billion surpassed the Zacks Consensus Estimate of $1.004 billion by 3.6%. Sales increased 19% from the prior-year quarter driven by strong demand for construction activities across the markets served by the company and increased pricing momentum in the aggregates segment.
Adjusted gross margin of 33.2% increased 490 basis points (bps). Adjusted EBITDA soared 31% year over year to $281.9 million driven by strong earnings growth in aggregates and improved earnings at all non-aggregates segments.
Segment Details
Aggregates
Revenues rose 20.6% year over year to $830.8 million owing to higher shipments. Freight-adjusted revenues increased 18.3% year over year to $629.1 million.
Aggregates shipments (volumes) rose 10% year over year driven by strong private and public demand in the end markets. However, volume was hurt by skilled trade labor problems and historically low consumption levels. Same-store aggregate shipments increased 7% year over year.
Freight-adjusted average sales price increased 8% on a same-store basis driven by price increases in most of the markets.
Gross profit margin of 39.9% increased 450 bps during the quarter. The segment’s cash gross profit of $308.6 million increased 25%.
Non-Aggregates
Adjusted total revenue in the Concrete segment was $88.0 million, down 11.1% year over year owing to soft volumes. On a same-store basis, segment volumes were flat year over year. However, prices increased 6.8% year over year. Adjusted gross profit of $10 million improved 50% from the year-ago quarter due to pricing gains.
Revenues in the Asphalt Mix segment were $178.9 million, up 31.2% year over year on the back of a 20% increase in same-store volume, partially offset by a price decline of 0.6%. Gross profit of $30 million was up from $15 million in the prior-year quarter driven by earnings from acquisitions completed since the first half of 2014, efficient management of material margins and volume growth.
Adjusted total revenue in the Calcium segment (formerly Cement) was $2.2 million, down from $2.3 million in the prior-year quarter. The segment posted adjusted gross profit of $0.8 million, down from $1.0 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 its calcium operation at the Brooksville, FL facility and renamed the segment to Calcium. The facility mines, produces and sells calcium products.
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 2014 levels, which will be driven by an improvement in gross profit per ton at the aggregates segment, higher earnings in the non-aggregates segments and lower costs.
The company expects aggregate pricing to continue to gain momentum in the fourth quarter of 2015 and 2016.
Vulcan Materials carries a Zacks Rank #2 (Buy).
Key Picks from the Sector
Other stocks in the building/construction sector that are worth considering include The Home Depot, Inc. HD, Tile Shop Holdings, Inc. TTS and Builders FirstSource, Inc. BLDR. While The Home Depot and Tile Shop Holdings sport a Zacks Rank #1, Builders FirstSource carries a Zacks Rank #2.
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