Is A Beat In Store For Vulcan (VMC) This Earnings Season?

Vulcan Materials Company (NYSE:VMC) is scheduled to release third-quarter 2019 results on Nov 6, before the opening bell.

In the last reported quarter, the company’s adjusted earnings of $1.48 per share and revenues of $1,327.7 million topped the Zacks Consensus Estimate by 2.1% and 1.7%, respectively.

Not only its top and bottom lines surpassed analysts’ expectation, but also the metrics increased 20.4% and 10.6%, respectively, on a year-over-year basis. The upside was mainly backed by broad-based shipment growth, price improvements and operating efficiencies in the aggregates business. Also, robust growth in public construction demand and continued improvement in private demand added to the positives. We believe that these factors might have aided the company’s third-quarter performance as well.

Trend in Estimates

The Zacks Consensus Estimate for earnings per share for the quarter to be reported has been downwardly revised by 1.2% over the past 30 days to $1.70. Nonetheless, this indicates an increase of 21.4% from the year-ago quarter. The consensus estimate for revenues is pegged at $1.37 billion, suggesting 10.3% year-over-year growth.

Factors at Play

In the to-be-reported quarter, Vulcan is likely to have benefited from efforts to enhance operational excellence. The company’s third-quarter earnings are likely to have been aided by acquisition synergies and cost-control measures. Also, its top line might have benefited from strong demand and shipments.

Notably, public sector spending — which is less affected by general economic cycles and deemed much more stable than private sector spending — plays a significant role in Vulcan’s overall business. This is likely to have aided the company’s earnings in the to-be-reported quarter.

Vulcan’s Aggregates business (including crushed stone, sand and gravel, and sand and other aggregates) has been a major contributor to revenue growth. This is likely to have continued in the to-be-reported quarter. The company’s strong aggregate shipments and pricing, underpinned by growing public demand and operational discipline, is likely to have aided third-quarter revenues as well.

Apart from the above-mentioned tailwinds, favorable weather condition is expected to have helped Vulcan to generate higher revenues.

Key Projections

The Zacks Consensus Estimate for Aggregates segment sales is pegged at $1,085 million, suggesting an increase of 9.3% from $984 million a year ago. For the Asphalt segment, the consensus estimate for sales is pegged $258 million, which implies 11.2% year-over-year growth. Meanwhile, the consensus mark for Concrete segment revenues is pegged at $104 million, implying nearly 2% year-over-year improvement. The same for Calcium segment revenues is $2 million, pointing to 4.7% growth from $1.91 million a year ago.

Coming to gross profit projections, the consensus mark for Aggregates and Asphalt segments indicates 14.8% and 30% year-over-year increase, respectively. The same for Concrete and Calcium segments suggests increase of 2.8% and 10%, respectively, from the year-ago period.

Quantitative Model Prediction

Our proven model predicts an earnings beat for Vulcan, which share space with Martin Marietta Materials, Inc. (NYSE:MLM) in the same industry, this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Currently, it has a Zacks Rank #2 and an Earnings ESP of +8.24%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks With Favorable Combination

Here are a few other construction stocks that you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat in the upcoming releases:

Jacobs Engineering Group Inc. (NYSE:JEC) has an Earnings ESP of +0.97% and a Zacks Rank #2.

Continental Building Products, Inc. (NYSE:CBPX) has an Earnings ESP of +3.95% and carries a Zacks Rank #3.

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