Valmont's (VMI) Q3 Earnings & Revenues Trail Estimates

Valmont Industries, Inc. (NYSE:VMI) posted net earnings of roughly $28.2 million or $1.24 per share for third-quarter 2016, a more than two-fold rise from around $12.1 million or 52 cents per share a year ago. The bottom line was supported by the company’s restructuring actions.

Barring one-time items (including restructuring costs), earnings came in at $1.48 per share for the reported quarter, up from $1.39 per share a year ago. The results, however, missed the Zacks Consensus Estimate of $1.50.

Net sales for the quarter were $610.2 million, down 3.5% year over year, also trailing the Zacks Consensus Estimate of $628 million. Revenues fell due to declines across utility support structures, coatings and energy and mining businesses.

Valmont continued to face a challenging market environment. Reduced international volumes in utility support structures and softer coatings demand in North America weighed on the top line in the quarter.

Segment Review

Broadly, the Omaha, NE-based company classifies its business segments as infrastructure- and agriculture-related.

Infrastructure-Related

Engineered Support Structures: The segment’s sales of $203.2 million for the reported quarter were 2% higher than the prior-year quarter, helped by increased wireless structure sales in the Asia-Pacific region. Sales of lighting and traffic products were higher in North America while sales of wireless communication products were lower. Lighting and traffic structure sales in Europe were flat year over year due to weak markets and limited new infrastructure investments.

Utility Support Structure: Sales fell 9% year over year to $150.7 million, hurt by reduced sales in international markets. Sales in North America were stable year over year. Increased volumes mostly offset lower pricing related to lower average steel costs.

Coatings Segment: This segment saw net sales of $70.1 million, down 8% year over year. Sales fell due to lower demand in North America from both external and internal customers and a significant decrease in demand from the solar energy industry.

Energy and Mining: Net sales decreased 4% to $81.6 million due to lower sales of grinding media products.

Agriculture-Related

Irrigation: The segment reported net sales of $127.8 million, stable year over year. Sale of irrigation equipment rose, driven by stronger international markets in Brazil and Sub-Saharan Africa. Tubing sales fell in the quarter on weak demand from agricultural OEMs and service center customers.

Financial Position

Valmont ended the quarter with a cash balance of $349.4 million, up roughly 12% year over year. Long-term debt at the end of the quarter was $755.6 million, down around 1% year over year.

The company repurchased 139,000 shares for $18 million during the quarter. The authorized buyback program still has a balance of $139 million.

Outlook

Valmont lowered its earnings guidance for 2016 to reflect weakness in its Coatings unit. The company now expects adjusted earnings per share to be in the range of $6.23 to $6.35 for 2016.

For the fourth quarter, the company envisions revenues from the Coatings Segment to be near current levels, which are weaker than the corresponding quarter a year ago. The company noted that cost structure for the coatings business has been reduced to better match current demand.

For the Irrigation segment, Valmont sees lower North American demand in the fourth quarter than last year due to crop price levels and associated pressure on net farm income. However, international irrigation markets have been forecast to be solid.

Valmont also said that utility demand is firming in North America and it is shipping an international project during the fourth quarter. Moreover, it expects growth in the Engineered Support Structures unit to be fueled by continued strength in telecom in the Asia Pacific region. The company also expects favorable year-over-year comparisons in the Energy and Mining division.

Valmont currently has a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked companies in the basic materials space include AK Steel Holding Corporation (NYSE:AKS) , Ryerson Holding Corporation (NYSE:RYI) and Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) .

AK Steel has a Zacks Rank #2 (Buy). The company has an expected earnings growth of 194.1% for the current year. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Ryerson Holding has an expected earnings growth of around 228.9% for the current year. The stock carries a Zacks Rank #2.

Schnitzer Steel, currently holding a Zacks Rank #2, has an expected earnings growth of roughly 275% for the current year.

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