All posts from Forzberg
Forzberg in Igor,

Vulcan's shares will reach $85 in medium term

Vulcan Materials, a US largest producer of construction aggregates, issued strong financial report for the fourth quarter of 2014. Revenues increased 11% y-o-y to $755 mn and surpassed consensus estimate of $694 mn. The growth was driven by strong demand on all Vulcan’s markets as the company continued to witness strong trends in private construction, both residential and non-residential, in the US. Aggregates shipments (volumes) jumped 15% and exceeded the company’s expectation of mid-to-high single-digits increase by a wide margin. Same-store aggregates shipments increased 12%. Adjusted EBITDA surged 32% y-o-y to $172 mn on the back of a strong operating leverage in the aggregates segment, and EBITDA margin improved 320 basis points to 22.8%. Adjusted earnings per share came in at 31 cents, up significantly y-o-y from 7 cents and well ahead of analysts’ average forecast of 26 cents.

During 2014, Vulcan generated approximately $1 bn in cash from the sale of assets and the results of operations, including $721 mn from the sale of the company's Florida concrete and cement businesses in March. Vulcan reduced long-term debt in 2014 by $517 mn, and at the end of the fourth quarter, the company's had Total debt to Adjusted EBITDA ratio of 3.3, which compares favorably with the 2013-end ratio of 5.4. The company also returned $29 mn in cash to shareholders in 2014 through dividends.

In 2014, Vulcan invested a total of $332 mn in strategic bolt-on acquisitions. Collectively, these acquisitions include 442 mn tons of proven and probable reserves in strategic, high growth markets. The company expects these recent acquisitions to contribute approximately $50 mn to EBITDA in 2015.

Vulcan’s management is optimistic about the upcoming 2015. Based on the current market situation, the company expects adjusted EBITDA in the range of $775-825 mn, compared with $600 mn in 2014. Vulcan also plans to accelerate the return of capital to shareholders through dividends, or other mechanisms.

With arget price of $85, Vulcan’s shares, in my view, look attractive for medium-term investment.