Vulcan Materials Company

This is our first report on Vulcan Materials Company, a renowned producer, distributor, and seller of construction materials. Vulcan’s last quarter was a major disappointment as it failed to meet the revenue expectations as well as the earnings expectations of Wall Street. Vulcan’s overall profitability has been negatively impacted by the losses produced by the network of assets supporting their shuttered Mexico operation. The proportion of SAG expenses to revenues increased by 50 basis points from the previous year to 7%. The company did continue its reliable cash generation and careful capital deployment and its free cash flow conversion has been above 90% on average over the last four years. The company’s ready-mix assets in New York, New Jersey, and Pennsylvania were sold during the fourth quarter which helped contribute to the cash flows. We initiate coverage on the stock of Vulcan Materials Company with a ‘Hold’ rating.