QUOTE AND NEWS
Market Intelligence Center  Dec 18  Comment 
For a hedged play on Vulcan Materials Co (VMC), MarketIntelligenceCenter.com’s option-trade picking algorithms recommend the Feb. '15 $62.50 covered call for a net debit in the $60.59 area. That is also the break-even stock price for the covered...
Benzinga  Dec 16  Comment 
Analysts at Deutsche Bank upgraded Dollar Tree (NASDAQ: DLTR) from undefined to Buy. The price target for Dollar Tree has been raised from $68 to $69. Dollar Tree's shares closed at $68.60 yesterday. Analysts at Goldman Sachs upgraded Vulcan...
Market Intelligence Center  Nov 19  Comment 
Vulcan Materials Co (VMC) presents a trading opportunity that offers a 3.83% return in just 93 days. A covered call on Vulcan Materials at the $65.00 level expiring on Feb. '15 offers an assigned return rate of 3.83% or 15.05% annualized. This...
newratings.com  Nov 4  Comment 
WASHINGTON (dpa-AFX) - Construction aggregates and materials manufacturer Vulcan Materials Co. (VMC) posted higher third-quarter net earnings of $66.94 million, or $0.50 per share, versus the year-ago quarter's $41.36 million, or $0.31 per...
Wall Street Journal  Nov 4  Comment 
Vulcan Materials Co. said its third-quarter earnings rose 62% on continued growth in aggregates shipments and stronger average selling prices.
Forbes  Oct 31  Comment 
Optimism surrounds Vulcan Materials, as it gets ready to report its third quarter results on Tuesday, November 4, 2014. Analysts are expecting the company to book a profit of 51 cents a share, up from 32 cents a year ago.Over the past month, the...
Market Intelligence Center  Oct 30  Comment 
A covered call identified by MarketIntelligececenter.com's patented algorithm on Vulcan Materials Co (VMC) could yield about 3.23% (23.13% annualized, for comparison purposes only) in 51 days. Pair a long position in the stock with the Dec. '14...




 
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Vulcan Materials Company (NYSE: VMC) is the largest producer of construction aggregates in the United States by sales. Aggregates include gravel, sand, and crushed rock and are used to make composite building materials like asphalt and concrete. The construction aggregates produced by VMC are used in projects as diverse as constructing airports, highways, and home foundations. The company focuses on areas with above-average population and aggregates demand growth. The company earned $2.5 billion in revenue and $31 million in net income in 2009.[1]

Public construction projects, such as bridges, dams and roads are responsible for almost 50% of the company's business.[2] These projects tend to be less dependent on economic factors and provide a degree of revenue stability. That said, approximately 19% of the company's revenue come from sales related to the residential construction market. The slumping U.S. Housing Market has cause the demand for some of the company's products to fall. However, limited competition has resulted in greater pricing power for companies like VMC. As such, in spite of the drop in sales volume, VMC has been able to keep revenue flat by increasing its average prices.

Like nuclear power plants and garbage dumps, quarries, which create noise and dust, are also subject to the "not in my backyard" mentality. Most residents prefer not to have a quarry within close proximity. This makes getting the zoning permits necessary to open a new quarry in a metropolitan area difficult. Construction aggregates are also expensive to transport due to their high density, and most aggregate producers are limited to supplying customers within a 50 mile radius. As a result, aggregate producers in one region do not typically face competition from producers in other regions.

Company Overview

Vulcan Materials Company operates primarily in the United States; it ships roughly 231 million tons of aggregates to 22 states, the District of Columbia, the Bahamas, and Mexico from 334 facilities.

VMC has defined its business into three operating segments, based on the company's principal product lines: aggregates, asphalt mix, concrete and cement:[3]

  • 75% of net sales originated from the Aggregates segment, which mines, processes, distributes and sells sand, gravel and crushed stone.
  • 24.8% of net sales originated from the Asphalt mix and Concrete segment, which produces and sells asphalt mix, ready-mixed concrete, concrete block, prestressed concrete beams and precast concrete, and sells other building materials.
  • 0.2% of net sales originated from the Cement segment, which mines, produces and sells Portland cement (a common type of cement used in the production of concrete) and masonry cement, imports, grinds, blends and sells cement and slag, and produces and sells calcium products.

Business Growth

FY 2009 (ended December 31, 2009)[1]

  • Net revenue decreased 26% to $2.5 billion. Aggregates shipments declined 26%.
  • Net income was $31 million compared to a net gain of $900K in the previous year. Net earnings from continuing operations were $18.6 million compared to $3.4 million in the previous year.

Trends and Forces

Falling Housing Starts Hurts VMC's Aggregates Business

The slumping U.S. Housing Market has led homebuilders to dramatically reduce the number of homes they build. The drop in the number of housing starts has a negative effect on Vulcan because fewer housing starts means less demand for its aggregates, which are used in foundations and driveways. Furthermore, the housing markets of Florida and California, which are two of Vulcan's biggest markets, are among the most affected..

Florida Rock Acquisition Adds Reserves and Geographical Positioning

Vulcan's acquisition of Florida Rock increased Vulcan's reserves by almost 20%. Arguably more important, however, is the expansion of VMCs geographic presence. The company's strategy is to do business in states with populations and metropolitan areas expanding more quickly than the national average, so that demand for their products grows correspondingly fast. The acquisition of Florida Rock gives Vulcan much greater access to markets in the southeastern and southern United States; both of these areas are growing more quickly than the national average. Vulcan's sales will benefit from these fast-growing areas.

Energy Costs Affect VMC's Business on Multiple Levels

Vulcan requires significant amounts of electricity , diesel, and natural gas in the production of construction materials - both in mining raw materials from quarries, and in processing products like asphalt mix and cement.. As such, increasing energy costs have already lowered gross profit, and continue to pose a threat to the company's margins. Furthermore, rising energy costs also increases the expense of transporting the company's products to market via truck, train, or ship.

Competition

The company's largest competitors are:

Although Vulcan is the largest construction aggregates company in the United States, the market for its products is highly competitive, including competition for price, service and product performance. The company estimates that the 10 largest aggregates producers in the United States supply about 30% to 35% of the national market.[4] There are, however, a large number of smaller, independent producers, which means that in any given market Vulcan may be competing with large regional and small local producers. As mentioned above, the high weight-to value ratio of aggregates makes long distance transport expensive, so both proximity to the market and transportation costs are important factors for market delivery. Vulcan maintains production facilities near rail lines and waterways, which increases the number of markets the company's products can reach.

References

  1. 1.0 1.1 VMC 2009 10-K "Selected Financial Data" pg. 22
  2. VMC 2009 10-K "Public Sector" pg. 7
  3. VMC 2009 10-K pg. 5-11
  4. VMC 2009 10-K "Largest US Aggregates Company By Production and Revenues" pg. 2
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