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solzberg in Gainers & Losers,

Vulcan Materials's stock to reach $125 in medium term

I remain upbeat about the shares of Vulcan Materials, one of the US largest producers of construction aggregates, concrete and asphalt. Recently, the company posted strong financials for the first quarter of 2016. Revenues jumped 19.6% y-o-y to $754.7 mn and surpassed consensus estimate of $710 mn. Aggregates shipments (volumes) rose 17% on the back of gradual recovery in private and public demand across end-markets. The improvement was also supported by favorable weather in some of the markets served by Vulcan, its customer’s success in winning and executing new project work, growth in public construction expenditure and an extra shipping day in the quarter owing to the leap year. Freight-adjusted average sales price climbed 9.5%, which was also driven by favorable product and geographic mix. Adjusted EBITDA soared 100.3% to $155.9 mn, and EBITDA margin expanded 840 basis points to 20.7%. Adjusted earnings per share came in at 26 cents beating analysts’ average projection by robust 20 cents. In Q1, Vulcan returned $50 mn to shareholders through dividends and share repurchases.

Strong Q1 results allowed Vulcan to raise its full year 2016 guidance. Based on the current market situation, the company expects adjusted EBITDA at or near the upper end of the previously estimated range of $1-1.1 bn, which will be driven by improvement in gross profit per ton at the Aggregates segment, higher earnings at the Non-Aggregates segments, and lower costs. The company also expects Aggregates shipments to rise 8-9%, higher than the prior expectation of around 7% increase. Average freight-adjusted aggregates pricing is projected to grow 7%.

I expect Vulcan’s shares to continue to rise, with medium-term target at $125.