Valmont Upgraded to Strong Buy - Analyst Blog

On Jul 10, Zacks Investment Research upgraded steel pipe and tube company Valmont Industries, Inc. (VMI) to a Zacks Rank #1 (Strong Buy).

Why Upgraded?

Valmont reported impressive first-quarter 2013 results on Apr 18. The company has delivered positive earnings surprises in the last 4 quarters with an average beat of 7.67%. Valmont's long-term estimated earnings per share growth rate is 11.7%.

Omaha, Neb.-based Valmont reported first quarter earnings of $2.89 per share, which outpaced the Zacks Consensus Estimate of $2.50 and exceeded the year-ago earnings of $1.96 by roughly 47%. Revenues increased roughly 14% year over year to $819.6 million in the first quarter, beating the Zacks Consensus Estimate of $809 million. Healthy gains across the Utility Support Structures and Irrigation segments and acquisitions boosted sales in the quarter.

Following the release of the first quarter results, the Zacks Consensus Estimate for 2013 for Valmont has gone up 3.55% to $10.80 per share. The Zacks Consensus Estimate for 2014 has also increased 1.43% to $11.35.

Valmont's Irrigation and Coatings segments are witnessing strong momentum. In the Irrigation segment, improving North American equipment demand amid the ongoing drought conditions and higher farm income is boosting sales and profitability. The Coatings segment is benefiting from moderating zinc prices and declining energy costs. The company is also poised to savor incremental opportunity in the utility market.

Valmont is actively pursuing capacity expansion through new constructions and extension of existing facilities to meet the increasing demand from utility customers in North America. Also, acquisitions have strengthened Valmont's position in the access systems market.

Valmont's strong presence in emerging markets should enable it to deliver incremental earnings in 2013. We are also encouraged by its commitment to boost shareholder returns through higher divi! dend payouts. This is evident as Valmont's board declared an 11% hike in its quarterly dividend to 25 cents per share from the prior payout of 22.5 cents on an annual basis on Apr 30.

Other Stocks to Consider

Other companies in the steel industry with favorable Zacks Rank are Kobe Steel Ltd. (KBSTY), Shiloh Industries Inc. (SHLO) and Nippon Steel & Sumitomo Metal Corporation (NSSMY). All of them hold a Zacks Rank #1 (Strong Buy).