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Core Points - Vulcan Materials Company will host its third quarter 2025 earnings conference call on October 30, 2025, at 9:00 a.m. CT [1] - Financial results will be released before the NYSE market opens on the same day [1] Company Overview - Vulcan Materials Company is the largest supplier of construction aggregates in the United States, primarily providing crushed stone, sand, and gravel [3] - The company is also a major producer of aggregates-based construction materials, including asphalt and ready-mixed concrete [3] - Vulcan is a member of the S&P 500 index and is headquartered in Birmingham, Alabama [3]

Market Overview - The market is experiencing a rebound despite concerns about overvaluation and risks related to inflation and labor weakness, as highlighted by JPAL's comments [1][2] - The AI trade remains strong, with continued positive performance from AI-related companies, indicating that this sector is still in its early stages of growth [3][2] Earnings and Market Sentiment - There is a lull in earnings reports, with significant companies like Costco and Nike reporting soon, leading to a quieter market period until bank earnings resume on October 14 [4][5] - Investors are advised to focus on fundamentals and technicals, tuning out the noise from political and market chatter [6] Investment Focus - The investment strategy includes a diversified approach, favoring sectors such as technology, industrials, financials, and select energy companies [7] - Vulcan Materials is highlighted as a strong investment choice due to its dominant position in the aggregates market, which is essential for construction [8][15] Company Performance - Vulcan Materials has successfully increased its pricing, raising the price per ton of aggregate by 55% over the last five years, despite facing some headwinds [13][12] - The company is well-positioned to benefit from upcoming infrastructure projects, particularly with the Space Force initiative in Alabama, which will require significant concrete supplies [9][14] Competitive Position - Vulcan Materials is recognized for its strong pricing power and high award-winning rate from municipalities, indicating a competitive edge in securing contracts [14][15] - Although Vulcan has underperformed compared to peers like Martin Marietta this year, its potential for future growth remains strong due to its market dominance [12][15]

Market Overview - Markets initially reacted to concerns about overvaluation and dual risks of inflation and weakening labor, but the uptrend may persist [1][2] - AI trade remains strong with continued beats across the street, suggesting it's still in early innings [2][3] - Market participants should tune out noise and focus on fundamentals and technicals during the earnings lull [4][5][6] Investment Strategy - The firm favors tech, industrials, financials, and select energy and power companies [7] - The firm is focusing on companies with dominant pricing power and strong EBIDA growth [12] - The firm likes Vulcan Materials due to its dominant position in aggregates and potential tailwinds from infrastructure projects and Space Force in Alabama [7][8][9][15] Vulcan Materials Analysis - Vulcan Materials has underperformed peers this year but has potential due to its dominant position in aggregates [11][15] - Vulcan Materials has increased the price per ton on aggregate by 55% over the last 5 years, leading to increased free cash flow [13] - Vulcan Materials has a high award-winning rate, especially from municipalities, increasing faster than its peers [14]

Group 1: Market Overview - The US large-cap equity market experienced significant growth in Q2 2025, with the S&P 500® Index increasing by 10.94% [1] - The market's strength was attributed to reduced concerns over potential harsh tariffs from President Trump, as the administration paused tariff implementation [1] Group 2: Macquarie Core Equity Fund Performance - The Macquarie Core Equity Fund's Institutional Class achieved a return of 11.94%, outperforming the S&P 500 Index [1] - Sector selection contributed to 80% of the fund's relative performance, while individual security selection accounted for the remaining 20% [1] Group 3: Vulcan Materials Company (NYSE:VMC) Insights - Vulcan Materials Company is the largest producer of construction aggregates in the US, with a one-month return of 2.11% and a 52-week gain of 18.46% [2][3] - As of September 18, 2025, Vulcan's stock closed at $298.58 per share, with a market capitalization of $39.45 billion [2] - The company benefits from its oligopoly status in major markets, allowing for rational competition and consistent price increases above cost inflation, which is expected to enhance profitability in the coming years [3] Group 4: Hedge Fund Interest - Vulcan Materials Company was held by 59 hedge fund portfolios at the end of Q2 2025, an increase from 56 in the previous quarter [4] - Despite its potential, some analysts believe that certain AI stocks may offer greater upside potential and lower downside risk compared to Vulcan [4]

Financial Performance - Vulcan Materials Company has demonstrated strong EBITDA and free cash flow margins, leading to an upgrade in its Long-term Issuer Default Rating to BBB+ from BBB by Fitch Ratings [1][2] - The company's leverage levels improved to 2.2x from 2.6x following a $2.3 billion acquisition in 2024, with expectations to average between 2x and 2.5x in the coming years [3] - The EBITDA margin improved by 200 basis points in 2024, with further improvements expected between 100 and 150 basis points in 2025 due to strong pricing and operational efficiencies [3] Market Position - Vulcan Materials is recognized as one of the largest producers of construction aggregates in the United States, providing essential materials such as crushed stone, sand, and gravel [4] - The company has a diverse quarry network spanning 23 states, which contributes to its leading market position and substantial financial flexibility [2]

Core Insights - Vulcan Materials Company (VMC) is the largest producer of construction aggregates in the U.S., with a market cap of $38.9 billion and operations in over 400 facilities across 22 states and other regions [1] - The company is categorized as a large-cap stock and has a strong presence in high-growth areas, particularly benefiting from population growth and infrastructure development [2] Stock Performance - Vulcan's stock has shown strong momentum, reaching a 52-week high of $302.21 and increasing by 15.5% over the past three months, outperforming the Nasdaq Composite's 12.4% rise [3] - In the long term, Vulcan's shares have increased by 17.3% in 2025 and 29.5% over the past year, surpassing the Nasdaq's 14.2% YTD rise and 26.7% rise over the past year [4] Financial Results - In Q2, Vulcan reported an adjusted EPS of $2.45, missing Wall Street's expectation of $2.55, with revenue of $2.1 billion also falling short of the $2.2 billion forecast due to weather disruptions and inflation impacting demand and operational costs [5] - Despite these challenges, Vulcan has outperformed its key competitor, Martin Marietta Materials, which saw a 24.3% rise over the past year [6] Analyst Ratings - Among 22 analysts covering VMC stock, the consensus rating is a "Strong Buy," with a mean price target of $307.35, indicating a 1.9% upside potential from current price levels [6]

Core Insights - The Zacks Building Products - Concrete & Aggregates industry is experiencing cautious optimism due to strong infrastructure demand, supported by funding from the Infrastructure Investment and Jobs Act (IIJA) and state-level initiatives [1][4] - Industrial demand is strengthening, particularly in data center expansion, semiconductor manufacturing, and new energy generation projects, despite challenges such as weather disruptions and labor costs [2] - The industry is focusing on acquisitions and operating efficiency to enhance earnings and cash flows while managing costs effectively [5] Industry Overview - The industry comprises manufacturers, distributors, and sellers of construction materials, including aggregates, concrete, and related items for various markets [3] - Key trends include a focus on reviving infrastructure through significant legislative investments aimed at enhancing American competitiveness and revitalizing infrastructure [4] Challenges - Industry players face challenges from rising input prices, labor shortages, and weather-related disruptions that can affect production and profitability [6] Market Position - The Zacks Building Products - Concrete & Aggregates industry ranks 98, placing it in the top 40% of over 250 Zacks industries, indicating solid near-term prospects [7][8] - The industry's earnings estimates for 2025 have increased from $2.09 to $2.18 per share, reflecting growing analyst confidence [9] Performance Metrics - Over the past year, the industry has underperformed the S&P 500, with a collective loss of 15.4% compared to the S&P 500's gain of 16.1% [11] - The industry is currently trading at a forward P/E ratio of 24.03X, higher than the S&P 500's 22.86X and the sector's 19.91X [14] Company Highlights - **Vulcan Materials Company**: Benefits from federal and state funding under the IIJA, with a focus on public infrastructure and industrial nonresidential demand. The company has seen an 18.7% stock gain over the past year and a projected 12% EPS growth for 2025 [18][19] - **Martin Marietta**: Driven by aggregates strength and favorable pricing dynamics, the company has gained 12.8% over the past year, although its 2025 EPS estimate shows a 42% decline [21][22]

Core Viewpoint - Vulcan Materials Company (VMC) reported lower-than-expected second-quarter 2025 results, with adjusted earnings and revenues missing the Zacks Consensus Estimate but showing year-over-year growth [1][3]. Financial Performance - Adjusted earnings per share (EPS) for the quarter were $2.45, missing the Zacks Consensus Estimate of $2.55 by 3.9%, but increased 4.3% year over year from $2.35 [3][9]. - Total revenues reached $2.1 billion, falling short of the consensus mark of $2.19 billion by 4%, yet grew 4.4% year over year [3][9]. - Adjusted EBITDA increased by 9.5% year over year to $660 million, with an adjusted EBITDA margin expanding 150 basis points to 31.4% [10]. Segment Performance - **Aggregates Segment**: Revenues increased to $1.65 billion from $1.61 billion year over year, despite a 1.3% decline in shipments to 59.3 million tons [4]. Freight-adjusted average sales price rose to $22.11 per ton from $21 [5]. - **Asphalt Segment**: Revenues were $368.9 million, up 12.1% year over year, with a slight decline in volumes to 3.9 million tons [6]. - **Concrete Segment**: Revenues surged 31.9% year over year to $220.6 million, with shipments growing to 1.2 million cubic yards [7]. Operational Highlights - Gross profit for the aggregates segment was $559.5 million, up from $528.5 million year over year, with gross margin expanding 110 basis points to 33.9% [5][9]. - Selling, administrative, and general (SAG) expenses as a percentage of total revenues increased by 20 basis points to 6.9% [10]. Financial Position - As of June 30, 2025, cash and cash equivalents were $347.4 million, down from $559.7 million at the end of 2024, while long-term debt decreased slightly to $4.36 billion [11]. - Net cash provided by operating activities for the first six months of 2025 was $593.2 million, up from $374.5 million a year ago [11]. Guidance for 2025 - Vulcan expects double-digit year-over-year growth in cash gross profit per ton for the aggregates segment, with shipment growth projected between 3% and 5% [12]. - Total Asphalt and Concrete segment's cash gross profit is anticipated to be around $360 million compared to $272 million in 2024 [13]. - Capital expenditures are expected to be between $750 million and $800 million for maintenance and growth projects [14].

Financial Data and Key Metrics Changes - Adjusted EBITDA improved by 9% year-over-year to $660 million despite lower aggregate shipments [8][14] - Adjusted EBITDA margin expanded by 260 basis points, and cash gross profit per ton increased by 13% [7][19] - Year-to-date cash gross profit per ton reached $11.25, over 50% higher than three years ago [19] Business Line Data and Key Metrics Changes - Aggregate shipments were impacted by an estimated 2 to 3 million tons due to extreme weather conditions [9][22] - Freight-adjusted average selling prices improved by 5%, with mix-adjusted prices up by 8% [10][19] - Residential construction activity remains weak, accounting for about 20% of shipments, but multifamily starts are showing signs of improvement [11][12] Market Data and Key Metrics Changes - Public infrastructure contract awards in Vulcan markets increased by over 20% year-over-year [13][37] - Data center activity is a bright spot, with discussions on projects totaling over $35 billion [13][72] - Private non-residential construction is beginning to recover, with positive trends in data centers and warehouses [12][56] Company Strategy and Development Direction - The company is focused on a two-pronged growth strategy: improving organic profitability and adding strategic assets [8][19] - Continued investment in maintenance and growth capital expenditures is expected to reach approximately $700 million for the full year [18][45] - The company aims to deliver between $2.35 billion and $2.55 billion of adjusted EBITDA for the year [18][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the second half of the year due to improving weather conditions and strong backlogs [24][72] - The company is optimistic about the recovery in private non-residential demand and the acceleration of public infrastructure spending [12][37] - Management noted that the underlying demand is improving, which supports the reaffirmation of full-year guidance [24][14] Other Important Information - Free cash flow on a trailing twelve-month basis surpassed $1 billion, enabling disciplined capital allocation [15][109] - The company reclassified $550 million of commercial paper borrowings from long-term to short-term debt [16][17] - The company is actively discussing potential M&A opportunities to enhance growth [110][111] Q&A Session Summary Question: What gives confidence in reaffirming EBITDA guidance despite a tough first half? - Management highlighted strong pricing and unit margins despite volume declines, indicating quality earnings [22][23] Question: Are project timelines stretching or improving? - Management noted that project timelines are improving, with increased bookings and backlogs across all end markets except single-family housing [30][31] Question: How is the infrastructure spending trend? - Management confirmed that infrastructure spending is strong, with significant increases in contract awards and bookings [36][37] Question: What is the outlook for capital expenditures? - Management expects full-year capital expenditures to be around $700 million, lower than the initial guidance due to weather impacts [45][18] Question: How will pricing be affected in 2026? - Management anticipates strong visibility in highway work and potential pricing growth, especially if private demand improves [106][107] Question: What is the expected free cash flow baseline moving forward? - Management indicated that the new baseline for free cash flow is around $1 billion, which may influence capital allocation strategies [109][110]