Valmont (VMI) Misses Q3 Earnings and Revenue Estimates - Analyst Blog

Valmont Industries, Inc. (VMI) posted a profit of $23.6 million or 92 cents per share in the third quarter of 2014, down 58.2% from $56.5 million or $2.10 per share earned in the year-ago quarter. Third-quarter adjusted earnings (excluding non-recurring items) were $1.92, which missed the Zacks Consensus Estimate of $2.16.

Valmont, which is among the prominent steel-pipe and tube companies along with MRC Global Inc. (MRC), Mueller Water Products, Inc. (MWA) and Tenaris SA (TS), registered revenues of $765.7 million in the quarter, down 1.6% from $778 million in the year-ago quarter. The decrease was mainly due to lower sales in the Utility Support Structures segment, underutilization of productive capacities and weak pricing in a few markets, which led to a 59% decrease in the segment's profits. Sales lagged the Zacks Consensus Estimate of $786 million.

Valmont's share price declined as much as around 8.4% in the trading session following the announcement, before closing the day roughly 4.6% down at $132.06.
 

 

Segment Highlights

Revenues from the Utility Support Structures segment declined 21% year over year to $181.2 million in the reported quarter as a result of a decline in North American volumes. The sales mix also included a larger portion of smaller projects that are exposed to price competition.

Irrigation segment revenues were unchanged year over year at $174.3 million in the quarter as modest declines in the North American markets were offset by gains in overseas markets. Sales declined in North America due to lower crop commodity prices. International demand increased owing to wide geographic coverage and higher investments in farm productivity.

Revenues from the Engineered Infrastructure Products division went up 13.3% year over year to $294.9 million. Sales were driven by the Valmont-SM which added $41.3 in revenues. Sales of lighting and traffic products in North America increased but were offset by modest reduction in sales of wireless communication products.

The Coatings segment's sales declined 3% to $86.7 million year over year. The decline was due to the impact of weak mining activity in Australia.
 
Financials

Valmont exited the quarter with cash and cash equivalents of $452.2 million, down 16.8% from $543.4 million in the year-ago quarter. Long-term debt increased 63.1% year over year to $768.6 million.

Valmont completed refinancing of its long-term debt in the reported quarter by issuing $250 million of 5.0% senior notes due 2044 and $250 million of 5.25% senior notes due 2054.  

Guidance

Looking ahead, Valmont expects the Utility Support Structures segment to generate improved sales and return to a double-digit operating income percent on a sequential basis in the fourth quarter.

In the Irrigation Segment, the company expects the selling season to begin later as the fall harvesting is still incomplete.

Valmont forecasts earnings for 2014 to be in the range of $8.55 to $8.65 per share including the impact of share buybacks and excluding 18 cents year-to-date fair value adjustments for Delta EMD and 91 cents year-to-date expenses for debt refinancing.

Valmont currently carries a Zacks Rank #4 (Sell).

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