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Valmont (VMI) Lowers Earnings Outlook for FY18, Shares Down

Zacks

Valmont Industries, Inc. VMI has cut its earnings outlook for 2018 factoring in the uncertainties surrounding the impacts of tariffs and trade policies, the truckers strike in Brazil, weakness in the Chinese markets and a challenging environment in Northern Europe.

The company now sees adjusted earnings per share for 2018 to be in the band of $7.55-$7.65, down from its prior view of $8.00-$8.10. Earnings, on a reported basis, has been forecast in the range of $6.51-$6.61 per share, also down from the earlier guidance of $7.70-$7.80 per share. Valmont also lowered its revenue growth expectations for 2018 to 4% from its previous view of 7%.

For second-quarter 2018, the company expects earnings (on a reported basis) to be in the range of $1.50-$1.53 per share and adjusted earnings to be $1.92-$1.95 per share.

Valmont’s shares tumbled roughly 8.9% to close at $138.30 yesterday. The company’s shares are down 16.6% year to date, underperforming its industry’s growth of 12.7%.


Valmont said that uncertainties around potential impacts of tariffs and trade policies coupled with low net farm income levels caused farmers to delay their irrigation purchase decisions in North America. Moreover, the truckers strike in Brazil resulted in an interruption of operations, affecting volumes and profitability in the second quarter as well as the expected 2018 results for its Irrigation segment.

For the Engineered Support Structures segment, the company noted that softness in Chinese markets (including a pause in China telecom tower construction) in all product lines affected second-quarter volume and profitability, and anticipated results for the full year. Price and volume recovery in North American telecom and lighting and traffic started in the second quarter and is expected to continue through 2018, the company added. It sees favorable segment comparisons for the second half of the year.

Moreover, a challenging competitive environment in Northern Europe further reduced demand for offshore wind structures for the rest of the year and impacted 2018 volume and profitability expectations for Valmont’s Utility Support Structures segment. The company said that lower-than-expected volumes in offshore wind is offsetting revenue growth in North America for 2018. It remains committed to pursue opportunities for global market expansion in its utility business.

For the Coatings unit, Valmont said that segment performance is in line with its expectations for the second quarter and 2018. The coatings business has rebounded globally and is on track to achieve good results in 2018, the company noted.

Valmont, which currently carries a Zacks Rank #4 (Sell), will report its second-quarter earnings after the closing bell on Jul 23.


Stocks to Consider

Better-ranked stocks worth considering in the industrial products space include Chart Industries, Inc. GTLS, MRC Global Inc. MRC and Actuant Corporation ATU, each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Chart Industries has an expected long-term earnings growth rate of 26.9%. Its shares have shot up roughly 85% over a year.

MRC Global has an expected long-term earnings growth rate of 15%. The company’s shares have rallied around 29% in a year.

Actuant has an expected long-term earnings growth rate of 15.6%. Its shares have gained roughly 12% over a year.

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