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The Outlook for the Vulcan Materials Company

Amanda Lawrence - Author

Jan. 11 2018, Updated 9:04 a.m. ET

What drove the revenue growth of the Vulcan Materials Company?

The Vulcan Materials Company’s (VMC) revenue grew 5% and 7% in 2016 and 9M17, respectively. Aggregates, concrete, and calcium drove the growth in 2016, offset by asphalt mix.

Aggregates, asphalt, and concrete drove the growth in 6M17, offset by calcium.

Gross profit grew 17% in 2016 before falling 1% in 9M17. The company recorded a gain on sale of assets for both periods. 2016 also saw a business interruption claims recovery. Including non-recurring items, operating expenses increased 4% in 2016 and 2% in 9M17. As a result, operating earnings grew 24% in 2016 before falling 2% in 9M17. Adjusted operating income grew 20% in 2016 and remained flat in 9M17.

Both periods recorded non-operating income unlike 2015. Interest expense decreased in 2016 before increasing in 9M17. Net earnings and adjusted diluted EPS (earnings per share) grew 31% and 5% in 2016 and 6M17, respectively.

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Dividend and price growth

Dividend per share grew 100% in 2016 and 25% in 2017. Prices rose 32% in 2016 and 3% in 2017. As a result, the dividend yield curve managed to sustain its upward-sloping curve. A forward PE (price-to-earnings ratio) of 42.8x and a dividend yield of 0.8% compare to a sector average forward PE of 24.9x and a dividend yield of 0.8%.

Compare to the broad indexes

The S&P 500 (SPX-INDEX)(SPY) offers a dividend yield of 2.2%, a PE ratio of 23.4x, and a YTD (year-to-date) return of 19.6%. The Dow Jones Industrial Average (DJIA-INDEX)(DIA) has a dividend yield of 2.2%, a PE ratio of 22.3x, and a YTD return of 25.1%. The NASDAQ Composite (COMP-INDEX)(ONEQ) has a PE ratio of 28.2x and a YTD return of 24.8%.

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Revenue and EPS outlook

The Vulcan Materials Company is projected to grow its revenue 7% and 11% in 2017 and 2018, respectively. The 2017 and 2018 diluted EPS are projected to grow 5% and 38%, respectively.

Dividend ETFs with exposure to the Vulcan Materials Company

The WisdomTree US Total Dividend ETF (DTD) has a PE of 20.5x and a dividend yield of 2.3%. The WisdomTree US LargeCap Dividend ETF (DLN) has a PE of 20.1x and a dividend yield of 2.3%.


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