This construction materials company beat analysts’ estimates by $0.19 per share last quarter, and 15 analysts have recently raised their EPS targets for this year, while 14 have increased 2017 forecasts. On a recent CNBC interview, S&P Investment Advisory said that “Vulcan is particularly well-poised because they (SIC) actually operate a major quarry in the Yucatan Peninsula in Mexico, which is very easy to export to Cuba. So if economic relations improve with Cuba, Vulcan could really be poised for a lot of growth outside of the U.S.”
Vulcan Materials Company (VMC)
From Cabot Growth Investor
The steady increase in demand for construction aggregates is playing out as expected, and Vulcan Materials Company (VMC) is benefiting in a big way.
We could harp on the first-quarter numbers, which were excellent (revenues up 20%, earnings blowing away expectations and management reiterating its outlook for strong cash flow growth this year), but it’s the bigger picture that’s even more impressive.
Quoting CEO J. Thomas Hill from the recent conference call: “I want to emphasize that we continue to believe that the recovery in our markets still has a long way to go. Our business is in the midst of a long, gradual recovery in demand … certainly, our first quarter saw a number of positive things come together all at once, but we are still in early stages of recovery for the construction economy. For example, we entered 2016 in terms of per capita aggregate demand relative to long-term averages, pretty close to where we were at the time of the 1982 recession.”
VMC has spurted to new price and relative performance (RP) peaks as more investors believe the best is yet to come.
Barring an all-out economic collapse, there doesn’t seem to be much standing in the way of hugely higher earnings for Vulcan in the quarters ahead as construction activity surges. You could nibble here if you don’t own any, though a dip toward the 25-day line (now nearing 112) would be a better entry point. BUY.
Michael Cintolo, Cabot Growth Investor, www.cabot.net, 978-745-5532, May 11 and May 18, 2016