Bear Of The Day: Vulcan Materials
Vulcan Materials (VMC - Free Report) ) currently lands a Zacks Rank #5 (Strong Sell) with its Building Products-Concrete and Aggregates Industry in the bottom 20% of over 250 Zacks industries.
There could be more short-term weaknesses ahead for Vulcan stock as a supplier of construction aggregates and other construction materials such as concrete, asphalt mix, and calcium.
Subpar Q4 Report
During its most recent fourth-quarter report on February 16, Vulcan stated it was impacted by abnormally wet and cold weather that disrupted construction activity and materials shipment in addition to softening in single-family residential demand.
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Disruption in construction activity led to Vulcan missing its Q4 earnings expectations by -16% at $1.08 per share compared to EPS estimates of $1.29. Vulcan also missed top-line estimates by -5%.
Shares of VMC have dropped roughly 9% since its Q4 report and the dip could continue with earnings estimates declining. Fiscal 2023 earnings estimates have now declined 12% over the last 90 days and FY24 EPS estimates have dropped 13%.
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Subpar Valuation
The declining earnings estimates have made Vulcan’s P/E valuation less attractive. Trading around $168 per share, Vulcan stock trades at 27.9X forward earnings.
While this is well below its extreme decade-long highs and a slight discount to the median of 31.6X, shares of VMC trade much higher than the industry average of 11.5X and above the S&P 500’s 18.3X.
Furthermore, the company’s EV/EBITDA of 15.9X is noticeably higher than its industry average of 7.6X with many analysts seeing the optimum level at less than 10X.
(Click on image to enlarge)
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Bottom Line
With Vulcan’s business industry weakening at the moment, justification for paying a premium for VMC shares is fading. To that point, investors may want to be cautious of Vulcan stock right now as the decline after its Q4 report could continue.
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