Vulcan Materials Company: VMC Is a Rock-Solid Stock — Literally

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Vulcan Materials Company (VMC) is the quintessence of an industrial materials company.

Vulcan Materials Company: VMC Is a Rock-Solid Stock -- LiterallyFor 107 years, VMC has been a producer of what’s called “construction aggregates.” And these days, it’s the largest producer in the U.S.

Construction aggregates are, basically, the crushed stone, sand and gravel that make up cement and asphalt.

Vulcan operates 315 sites that produce the materials and another 100 that produce asphalt and concrete. Most of its operations are in the South and Southwest, with Mid-Atlantic states like Maryland, Pennsylvania and Virginia in the mix as well.

VMC also has a mining operation in Mexico, where it quarries quality stone that it uses in the U.S. for its aggregates. The strong dollar is certainly a help with the mine, allowing VMC to pay less for its best materials.

A Smooth Ride for VMC Stock

And that is evidenced in its recent earnings — analysts were expecting 60 cents a share and VMC delivered 74 cents, more than a 20% beat. That is a big deal for a company that doesn’t have a high-margin business, like technology or pharmaceutical firms.

The growth is attributed to private construction going on in the U.S., both commercial and residential. Low interest rates mean that companies are borrowing to buy and develop real estate.

Those new properties need concrete for the buildings and asphalt for the roads in the neighborhood developments and office parks. And as the largest supplier of aggregates in the U.S., VMC is doing very well from the construction boom.

Aggregate sales were up 8% for the quarter compared to the same quarter last year. Sales for 2015 were up 14% from 2014.

Another feather in VMC’s cap is the fact that it is located in some of the fastest-growing areas in the U.S., according to Moody’s Analytics. That sets it up on the growth track just by the sheer fact it is the go-to aggregates supplier.

Private construction makes up about half of VMC’s business, with the margins much better on nonresidential construction since that uses more aggregates than residential construction does.

Again, there’s a very good chance that whoever becomes the next president, some sort of major infrastructure initiative will be undertaken for the crumbling roads and bridges in the U.S. And you can be sure that VMC will be a major beneficiary.

Another positive sign is that lower fuel and commodity prices also work in favor of VMC. Last year, it saw unit costs for aggregate materials fall by 3%, which is very bullish for its bottom line.

The stock has a small dividend — around 0.43% now — but that’s not the story with this company. This is a compelling low-volatility play in a high-volatility market.

Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/02/vmc-a-rock-solid-stock-literally/.

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