Vulcan Benefits from Robust Construction Demand in Q2 but Inflationary Pressure Persists

Narrow-moat-rated Vulcan reported second-quarter results that were largely in line with our expectations. Revenue increased 43% year-over year on strong volume, pricing, and the acquisition of U.S. Concrete in late 2021. While top-line growth was robust, Vulcan faced continued operating cost pressure that weighed on margins during the quarter. Gross margins declined roughly 650 basis points to 22.8% versus a year ago due to higher operating costs. That said, second-quarter gross margin was up over 500 basis points sequentially as the firm realized selling price increases from earlier in the year. We expect additional pricing action in the second half of 2022 that should benefit margins in 2023.