Valmont Cuts FY14 Forecast on Utility Structures Weakness - Analyst Blog

Valmont Industries VMI has cut its earnings guidance for full-year 2014, citing increased challenges in its North American utility structures business and sustained weakness in the Australian economy.

The NE-based steel pipe and tube company now sees adjusted earnings in the range of $9.35 to $9.65 per share for 2014. Earlier, it expected earnings between $10.00 and $10.50 per share for the year. Analysts polled by Zacks currently expect earnings of $10.40 per share on an average for 2014.

For second-quarter 2014, Valmont envisions earnings in the band of $2.35 to $2.40 per share versus $3.33 per share earned a year ago.

Valmont's shares, which are up around 8% so far this year, slipped as much as 6% in extended trading yesterday.

Valmont now envisions operating income (as a percentage of sales) for its Utility Support Structures segment to be between 12% and 14% for both the second quarter and 2014. The company previously projected the segment to deliver operating margin towards the bottom end of its target of 15% to 20% in 2014. Valmont said that the mix and timing of projects now provide less favorable profit outlook than what management expected earlier.

In the company's Coatings division, a weak Australian economy is hurting the profitability of its galvanizing businesses in the country. The results from Valmont's Australian operations have also been impacted by less favorable exchange rates.

Valmont continues to expect results from its Irrigation Segment to be lower year over year in the second quarter. For second-half 2014, the company expects profitability from the division to be roughly flat compared with the same period a year ago. However, it sees higher profits from its Engineered Infrastructure Products unit in the second quarter.  

Valmont's board of directors came up with a capital allocation plan last month. The board authorized it to repurchase up to $500 million of its outstanding shares. The company has bought back around 436,000 shares (1.6% of outstanding shares) worth $69 million since the announcement.

Valmont, a Zacks Rank #3 (Hold) stock, will release its second-quarter results on Jul 17.

Other players in the steel and related industries worth considering are Universal Stainless & Alloy Products Inc. USAP, Grupo Simec S.A.B. de C.V. SIM and ThyssenKrupp AG (TYEKF). While Universal Stainless carries a Zacks Rank #1 (Strong Buy), both Grupo Simec and ThyssenKrupp hold a Zacks Rank #2 (Buy).