VMC - Embedded Expectations Analysis - 2019 02 08
Vulcan Materials Company (VMC:USA) currently trades below historical averages relative to UAFRS-based (Uniform) Earnings, with a 22.1x Uniform P/E. At these levels, the market has bullish expectations for the firm, while management has concerns about operating performance and margins, invested capital, shareholder returns, and their San Diego projectSpecifically, management appears to have concerns about their ability to continue growing unit margins, and may be concerned about revenue growth and public funding of projects. Furthermore, management may have concerns about the lingering effects of natural disasters and rising commodity costs, and the amount of capital being used to grow the business. Moreover, they may be concerned about their ability to distribute a sustainable dividend, and may be exaggerating their focus on returning excess cash to shareholders through stock repurchases. Finally, management may be overstating the excitement around a greenfield project in San Diego, and their ability to handle large projects
Vulcan Materials is a supplier of construction aggregates and a producer of asphalt mix and ready-mixed concrete. The company has four segments: Aggregates, which produces and sells aggregates (crushed stone, sand and gravel, sand, and other aggregates) and related products and services; Asphalt, which produces and sells asphalt mix in Alabama, Arizona, California, New Mexico, Tennessee and Texas, and includes asphalt construction paving in Alabama, Tennessee and Texas; Concrete, which produces and sells ready-mixed concrete; and Calcium, which consists of a Florida facility that mines, produces and sells calcium products.
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- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
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- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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