Vulcan Materials Shares Punished Following Earnings; Argus Says Selloff Was Overdone

Argus said the recent selloff in Vulcan Materials Company (NYSE: VMC) shares following its lower-than-expected Q@ earnings was overdone. The firm maintained its Buy rating on the stock with a target price of $129.

Vulcan reported adjusted earnings of $0.90 per share, up from $0.65 a year earlier. However, adjusted EPS missed the consensus forecast of $1.01 due to wet weather and project delays.

"In our view, Vulcan remains one of the best-positioned companies in the industry thanks to its size and scale, and significant presence in states such as Florida, California, and Texas, where demand for basic road and building products remains strong," analyst David Coleman wrote in a note.

Vulcan expects overall demand growth of 7 percent in 2016, driven by private and public construction. It reaffirmed its adjusted 2016 EBITDA forecast of $1-$1.1 billion, and again guided toward the high end of that range. In 2015, EBITDA totaled $836 million.

Though the analyst cut his 2016 EPS estimate to reflect the weaker-than-expected quarterly results, the revised numbers came in above the Street view. Coleman lowered his 2016 EPS estimate to $3.46 from $3.69, but remains above the consensus forecast of $3.42.

"Our above-consensus EPS estimates for 2016 reflect prospects for strong aggregates shipments and increased demand from residential construction and new highway and infrastructure projects," Coleman added.

At time of writing, shares of Vulcan Materials recouped some of its earlier losses and were up 1.69 percent to $118.53. Coleman's target of $129 implies a potential total return, including the dividend, of 12 percent from current levels.