Vulcan Materials Co. (VMC) is the United States' largest producer of construction aggregates (crushed stone, sand, and gravel). Its largest markets include Texas, California, Virginia, Tennessee, Georgia, Florida, North Carolina, and Alabama.
The company reported revenue growth for the second quarter, but earnings were down year over year due to energy inflation and disruptive weather during the quarter. However, VMC has been benefiting from growth in heavy industrial projects, including data centers and warehouses.
As of the most recent quarter, the company had $858 million in cash compared with only $15 million in short-term debt. Its solid balance sheet led to a Quality Grade of B in our POWR Ratings system. In terms of growth going forward, analysts expect earnings to rise 9% year over year in the current quarter.
From a valuation standpoint, the stock does appear overvalued with a trailing P/E of 37.04 and a forward P/E of 37.88. The stock has been trending up since September, but performance has been mixed since May. This is shown in the chart below.
Take a look at the 1-year chart of VMC below with added notations:
VMC was in a steady rally higher into its May high. However, the stock has recently struggled to get past the $194 resistance (red) area. The $194 area is also a 52-week high.
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VMC has dropped back again this past week, but traders should watch for a possible return to the high. The ideal long position on the stock would be on a breakout above the $194 level, with a protective stop placed below the entry point.
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VMC shares were unchanged in premarket trading Wednesday. Year-to-date, VMC has gained 25.65%, versus a 19.31% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp
I am an expert stock market coach having helped over 4000 beginner and advanced traders & investors from around the world take control of their financial futures. I also write stock market related articles for the Adam Mesh Trading Group and Yolo Publishing.
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