Vulcan Earnings: Strong Pricing Gains Offset Residential Construction Slump

Vulcan Materials reported third-quarter results that were largely in line with our expectations. Net sales rose almost 5% year over year, led by the strength in Vulcan’s aggregates and asphalt businesses. Consolidated gross margins continued to improve, expanding 340 basis points to 27%, largely due to robust aggregate pricing gains. Despite these gains, weak residential construction continues to weigh on Vulcan’s shipments and has shown little sign of improvement throughout the year. While infrastructure and nonresidential projects have buoyed volumes, softening nonresidential demand could create additional volume pressure. Nevertheless, we maintain our $154 fair value estimate.