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Vulcan's shares will reach $99 by 10.06.2015
5 september 2015

We are still upbeat about shares of Vulcan Materials (VMC), a major US producer of construction aggregates and aggregates-based construction materials, including asphalt and ready-mixed concrete. The company continues to deliver double-digit growth. According to the recently released financial report for Q2 2015, revenue rose by 13% y-o-y to USD 895 mn on the backdrop of higher construction activity on most markets of the company, outpacing the consensus of USD 865 mn. Shipments of aggregates increased by 9% to 47.5 mn t, however, dynamics of this gauge was negatively affected by adverse weather conditions in April and May. Average freight-adjusted sales price climbed 6%. Adjusted EBITDA jumped 33% to USD 229 mn, while EBITDA margin was up 3.8 pps to 25.6%. Adjusted EPS spiked 83% to 66 cents, matching estimate of Wall Street analysts.

Vulcan continued to make M&A deals in Q2. In particular, the company acquired three assets for aggregates production and seven assets for concrete production in the territory of Arizona and New Mexico states.

Given the current market situation, Vulcan left EBITDA forecast for the current year unchanged at USD 775-825 mn compared to USD 600 mn in 2014. The company expects a further increase in prices in the bulk materials segment in the second half of the year and it will continue its efforts to optimize operating costs. At the same time, the company noted that schedule for a number of construction projects in the US was broken due to bad weather in April and May, and it may adversely affect shipments in the coming quarters.

We believe that demand for the company’s products will continue to rapidly grow due to the recovery of the US economy, which will improve the company’s financial performance and boost share price. We left target price of Vulcan’s shares unchanged at USD 105 and rate the name as a Buy in the mid-term. The short-term technical target is USD 99.

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Vulcan's shares will reach $99 by 10.06.2015

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