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Vulcan Materials Hits 52-Week High on Strong 2016 Outlook

On Apr 8, 2016, shares of Vulcan Materials Company VMC reached a 52-week high of $109.00.The building materials company consistently delivered strong performance in 2015 and is poised to gain further momentum in 2016, as public construction activity picks up traction. The share prices eventually closed at $108.00, representing a year-to-date return of around 17.1%.  

Share Price Drivers

This Zacks Rank #1 (Strong Buy) company consistently delivered strong performance through 2015. Though severe wet weather disrupted its shipments in the first half of 2015, volumes picked up in the latter half backed by increasing demand from construction activities across the markets served by the company. Strong pricing momentum in the Aggregates segment resulted in expanding profit margins in 2015.

Vulcan’s products cater to public, private residential and non-residential construction end markets. Sustained growth in construction activities improves the demand for both the aggregates as well as non-aggregates businesses of Vulcan.

In 2016, management predicts stronger public sector construction activity which should boost demand for Vulcan’s products.

A multi-year highway bill — five-year, $305 billion FAST Act — was enacted in Dec 2015 which increased the funding certainty for state transportation and highway programs. This, coupled with state initiatives to finance infrastructure projects, should boost aggregate-intensive construction infrastructure activity in 2016 thereby increasing aggregates demand.

Sustained increase in construction activity and demand for aggregates across all the markets in both private and public sector coupled with robust pricing momentum should drive revenues and profits in 2016.

On Feb 12, the company increased its quarterly dividend by a robust 100%, from 10 cents to 20 cents. It seems the company maintained its history of returning superb value to the shareholders, which includes the 67% and 400% dividend hikes offered in 2015 and 2014, respectively.

Other Stocks to Consider

Investors interested in the building/construction industry can also consider stocks like CEMEX, S.A.B. de C.V. CX, Gibraltar Industries, Inc. ROCK and Headwaters Incorporated HW. All three companies sport a Zacks Rank #1.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
HEADWATERS INC (HW): Free Stock Analysis Report
CEMEX SA ADR (CX): Free Stock Analysis Report
VULCAN MATLS CO (VMC): Free Stock Analysis Report
GIBRALTAR INDUS (ROCK): Free Stock Analysis Report
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