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The average rate for a 30-year fixed mortgage rose to about 7.5 percent this week. This is a headwind for the private construction market because higher interest rates make it more expensive for developers to start new housing or commercial projects.
While Vulcan relies heavily on government-funded roads and bridges, which have steady long-term funding, private building still makes up a significant part of its business. If high rates cause a pullback in new construction, it could put pressure on the volume of materials Vulcan sells even if it keeps its pricing power.
Source: Bloomberg Markets and Finance
Truist Financial nudged its price target for Vulcan down to $320 from $360. Even with the lower target, the firm's outlook remains well above the current stock price of about $242. The average target across all analysts who follow the company now sits at $315.
Source: Truist Financial
Wells Fargo downgraded the company to underweight, a rating that suggests they expect the stock to perform worse than others in the market. The firm set a price target of $254, which is significantly lower than the average analyst target of $315.
This move stands out because it goes against the broader view that public infrastructure spending will provide a steady floor for the business. While the new target is still slightly above the current price, the downgrade signals a shift in how some analysts view the company's ability to keep growing profits as construction demand shifts.
Source: Wells Fargo
Crude oil prices rose after reports of a draft plan that could restrict ship traffic in the Strait of Hormuz. For a company like Vulcan, which relies on heavy machinery and trucks to move stone and gravel, higher fuel prices increase the cost of doing business. While the company has been successful at raising its own prices to cover costs, a sustained jump in energy prices could squeeze profit margins if it happens too quickly.
Source: CNBC
Vulcan earned $2.59 per share this quarter, coming in ahead of the $2.46 analysts expected. Total revenue reached $2.16 billion as the company successfully raised prices for its aggregates, the crushed stone and sand used in construction, to more than offset higher costs for things like fuel.
Management noted that profit per ton grew to over $12 even with disruptive weather slowing down some projects. The company kept its profit outlook for the full year unchanged, signaling it expects steady demand for infrastructure materials to continue through the second half of the year.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
Management has cleared its own bar in five of the last eight quarters, showing they can generally keep profits steady even as construction demand shifts.
| Expectation | |
|---|---|
| EPS | $2.96 |
| Revenue | $2.27B |
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