It has been about a month since the last earnings report for Valmont Industries (VMI). Shares have lost about 2.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Valmont due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Valmont's Earnings & Revenues Trail Estimates in Q4
Valmont swung to profits of roughly $17.7 million or 80 cents per share in fourth-quarter 2018 from a loss of around $3.6 million or 16 cents a year ago. Adjusted earnings in the quarter were $1.87 per share, up from $1.67 per share a year ago. However, it fell short of the Zacks Consensus Estimate of $1.89.
Net sales in the quarter totaled $697.4 million, down roughly 2% year over year, also lagging the Zacks Consensus Estimate of $709.3 million. Increased sales across Engineered Support Structures and Coatings units were offset by reduced project sales in the company’s Utility segment and international irrigation markets. Sales were also impacted by unfavorable currency translation.
FY18 Results
For 2018, profits were $94.4 million or $4.20 per share, down roughly 19% from $116.2 million or $5.11 per share recorded in 2017.
Net sales for the year edged up roughly 0.4% year over year to $2,757.1 million, aided by gains in Engineered Support Structures and Coatings divisions.
Segment Highlights
Infrastructure-Related
Engineered Support Structures segment sales of $259.7 million for the reported quarter were up around 4% year over year owing to pricing actions across the segment and increased volumes in North America. The company saw higher lighting and traffic product sales In North America. However, it witnessed lower wireless communication volumes in China. Sales also fell in Europe due to lower volumes and unfavorable currency impact.
Utility Support Structures sales fell roughly 4% year over year to $233.3 million, impacted by absence of a sizable project and a less favorable product mix in North America.
Coatings segment recorded year-over-year sales growth of 4% to $86.4 million, aided by pricing actions to recover zinc cost increases as well as firm industrial demand.
Agriculture-Related
The Irrigation unit reported global sales of $142.6 million, down around 5% year over year, dented by lower sales in the international market due to unfavorable currency translation and lower project sales in emerging markets. Sales in North America went up 9% year over year to $84.8 million.
Financial Position
Valmont exited 2018 with cash and cash equivalents of $313.2 million, down roughly 36% year over year. Long-term debt at the end of the year was $741,8 million, down around 1%.
The company returned $149 million to shareholders through share repurchases and dividends in 2018.
Outlook
The company expects earnings per share in the range of $8.10-$8.90 for 2019. It also envisions revenue growth of 7-8% year over year in 2019. Capital spending for the year has been forecast in the band of $90-$100 million. Valmont expects sales and earnings growth to be driven by strong market demand.
Per the company, sales growth at the Engineered Support Structures segment is supported by continued government investments in infrastructure development. Utility segment sales are forecast to be driven by strong market demand from ongoing investments in grid hardening and renewable energy sources. Moreover, coatings segment revenues are expected to be driven by global industrial economic growth.
The company also noted that irrigation markets in North America will continue to be muted by low expected net farm income levels and low commodity prices. However, it envisions international irrigation project activity in emerging markets to accelerate throughout 2019. Market environment in Brazil is also forecast to improve.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -9.99% due to these changes.
VGM Scores
Currently, Valmont has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Valmont has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Valmont Industries, Inc. (VMI): Free Stock Analysis Report
Original post
Zacks Investment Research