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Maverick Capital Adds to Position in Vulcan Materials in 4Q14

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Maverick Capital and Vulcan Materials

Maverick Capital increased its position in Vulcan Materials Company (VMC) by more than $147 million in stock. Vulcan Materials accounts for 2.91% of the fund’s portfolio in 4Q14. VMC is the largest producer of construction aggregates.

Another building materials company in Maverick Capital’s third quarter portfolio was Martin Marietta Materials, Inc. (MLM). VMC’s other competitors in the building materials industry are Headwaters Inc. (HW) and USG Corporation (USG) with market caps of $1.33 billion and $3.78 billion, respectively.

The iShares U.S. Home Construction ETF (ITB) has 15% exposure to the basic materials sector.

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Vulcan’s Q4 revenue and earnings beat estimates

Vulcan Materials Company (VMC) reported Q4 revenues of $755 million, beating the consensus estimate of $686 million. The company reported EPS (earnings per share) of $0.31, surpassing consensus estimates of $0.26.

Similarly, Headwaters Inc. (HW) also beat its 1Q15 earnings and reported an impressive increase of 143% to $0.17 compared to $0.07 in the year-ago quarter. However, USG Corporation (USG) missed its Q4 earnings and revenue estimates by $0.13 and $17 million, respectively.

For full year 2014, VMC’s total revenues increased 8% and gross profits increased 38%. This growth was driven by aggregates volume growth, stronger pricing, and improved margins.

J. Thomas Hill, Vulcan Materials’ chief executive officer and president, noted in the company’s 4Q14 earnings release, “These results, continuing the pattern of strong execution on our aggregates-focused strategy throughout the year, were achieved despite price gains muted by a negative geographic and product mix. This strong momentum bodes well for 2015, a year in which we expect a continued recovery in demand for our products and, importantly, an improving pricing and margin environment.”

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Aggregates business driven by stronger demand

Aggregates sales were up 20% compared to the year-ago quarter. On a same-store basis, total aggregates shipments increased 12%. An earnings release noted that this sales growth was “supported by strong volume growth across most of the Company’s footprint.”

The company further said, “Shipment momentum continued to improve across most of our footprint, driven not only by large projects but also by strengthening construction activity across all end-use markets.”

Outlook for 2015

In terms of outlook, Hill noted in the company’s 4Q14 earnings release, “Vulcan-served markets continue to show favorable above-average growth, with Vulcan markets growing faster than U.S. markets as a whole. Although aggregates demand remains well below normal levels, this steady and gradual improvement is a further indication of construction activity recovery. We continue to convert higher volumes into higher unit margins and are very well positioned for significant future earnings growth.”

In the next part of this series, we’ll look at Maverick Capital’s position change in Santander Consumer USA Holdings (SC).

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