Vulcan Earnings: Robust Pricing Provides Room for Margin Expansion, but Shares Remain Pricey

Narrow-moat-rated Vulcan Materials reported strong second-quarter results, with net sales increasing 8% year over year amid steady end-market demand. Consolidated gross margins expanded almost 500 basis points versus a year ago to 27.6% because of strong pricing gains in its aggregates business. Despite a slowdown in residential housing starts, nonresidential construction has remained strong, while Vulcan has been able to raise prices for its materials at an impressive pace. We expect Vulcan’s robust pricing will offset potential volume headwinds in the second half of the year. As such, we've increased our fair value estimate to $154 per share from $146 due to higher near-term revenue and profitability in our forecast.