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Valmont Industries (VMI) Raised to Buy on Healthy Prospects

Zacks Equity Research
Updated

On May 29, Zacks Investment Research upgraded steel pipe and tube company, Valmont Industries VMI to a Zacks Rank #2 (Buy). Going by the Zacks model, companies carrying a Zacks Rank #2 have higher chances of outperforming the broader market.

Why the Upgrade?

Valmont saw its profits (on a reported basis) rise around 18% year over year to roughly $39 million or $1.72 per share in first-quarter 2017. Adjusted earnings of $1.68 per share for the quarter topped the Zacks Consensus Estimate of $1.62.

Revenues also went up 7% year over year to $637.5 million, beating the Zacks Consensus Estimate of $624 million. Sales rose across all segments, led by a strong performance in Utility Support Structures.

Valmont, in its first-quarter call, noted that it is encouraged by improved demand in certain markets, substantiated by second straight quarter of improved sales. Reconfirming the earnings, sales and cash guidance for the year, the company acknowledged that volatility in the prices of certain raw materials and weak fundamentals in farm economy, could still impact some businesses. However, it sees improvement across most of its end-markets.

Annual estimates for Valmont have moved north over the past 60 days, reflecting analysts’ confidence on the stock. Over this period, the Zacks Consensus Estimate for 2017 has increased by around 0.4% to $7.08 per share. The Zacks Consensus Estimate for 2018 has also moved up 1.4% over the same timeframe to $7.96.

Valmont has also outperformed the Zacks categorized Steel-Pipe and Tube industry year to date, partly driven by its forecast-topping earnings performance in the last two quarters. The company's shares gained roughly 4% in this period, while the industry saw a 11.3% decline.


While the prevailing external environment remains challenging for Valmont, the company should benefit from its restructuring actions, cost management and a focus on operational improvements. The restructuring actions are expected to improve its overall cost structure, thereby supporting its earnings in 2017.

Moreover, the company remains focused on mitigating the impact of raw material cost inflation through strategic measures including cost reductions and pricing actions.   

Valmont should also gain from acquisitions and its efforts to boost its market position through investments towards developing its product line. The acquisition of leading Northern European engineered steel products maker – DS-SM A/S (rechristened Valmont SM A/S) – has enabled Valmont to cater to a wide range of industries.

Moreover, the acquisition of a majority stake in South Dakota-based AgSense has broadened Valmont’s portfolio in remote monitoring and control technology for agriculture. The purchase of American Galvanizing Company, a market leader in hot-dip galvanizing in the Northeast U.S., also expanded Valmont Coatings' network to 33 facilities in 6 countries around the world.

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Valmont Industries, Inc. Price and Consensus

 

Valmont Industries, Inc. Price and Consensus | Valmont Industries, Inc. Quote

Other Stocks to Consider

Other well-placed companies in the steel space include ArcelorMittal MT, Schnitzer Steel Industries, Inc. SCHN and MRC Global Inc. MRC. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ArcelorMittal sports a Zacks Rank #1 and has expected long-term earnings growth of 11.4%.

Schnitzer Steel carries a Zacks Rank #2 and has expected earnings growth of 56.5% for the current year.

MRC Global has expected long-term earnings growth of 15% and carries a Zacks Rank #2.

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Click for Free Valmont Industries, Inc. (VMI) Stock Analysis Report >>
 
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Click for Free Schnitzer Steel Industries, Inc. (SCHN) Stock Analysis Report >>
 
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Zacks Investment Research