As investors seek dependable dividend stocks with the potential for long-term appreciation, Vulcan Materials Company (VMC) stands out as a compelling option. VMC has recently garnered attention after receiving a “Buy” rating from UBS, driven by optimistic forecasts for the non-residential construction market through the second half of 2025-2026. As the largest supplier of construction aggregates in the United States, VMC is well-positioned to capitalize on the expected uptick in building activity. Beyond its growth potential, the company pays dividends, making it a solid option for income-focused investors.
In this article, we will delve into Vulcan Materials’ fundamentals, examining its financials, valuation, dividend potential, growth prospects, and sentiment in the options market to determine why now might be the right time to add VMC to your long-term investment portfolio.
About Vulcan Materials Stock
Based in Alabama, Vulcan Materials Company (VMC) is the largest domestic supplier of construction aggregates, primarily crushed stone, sand, and gravel. It is also a major producer of aggregates-based construction materials such as asphalt and ready-mixed concrete. Its market cap currently stands at $38 billion.
Shares of Vulcan Materials have gained 26.7% year-to-date, performing roughly in line with the broader market.
Vulcan Materials Initiated With Bullish View at UBS
On Nov. 7, UBS analyst Steven Fisher initiated coverage of Vulcan Materials with a “Buy” rating. The firm stated that the provider of construction materials and road-building supplies stands to benefit from increased building activity.
“We see Vulcan as a beneficiary of an improving non-residential construction market in 2H25-2026, and believe the accompanying earnings uplift is underappreciated,” the UBS analyst said in a note. This will drive 3%-4% growth in aggregate volume in 2026 and also strengthen Vulcan’s pricing power, Fisher added.
UBS set a price target of $349 per share for Vulcan, based on an estimated enterprise value of 18.25 times its projected earnings before interest, taxes, depreciation, and amortization (EBITDA) for 2026.
Recent News for VMC Stock
On Sept. 26, Vulcan Materials Company disclosed that it had entered into a definitive agreement to acquire Wake Stone Corporation, a leading supplier of pure-play aggregates in the Carolinas. This value-enhancing acquisition is projected to supply over 60 years of quality hard rock reserves to serve rapidly growing geographical areas, particularly Raleigh, North Carolina.
Tom Hill, Vulcan’s Chairman and CEO, said, “This acquisition is consistent with our aggregates-led growth strategy of continuing to expand our reach to better serve more high-growth regions in the United States. Our Vulcan Way of Selling and Vulcan Way of Operating disciplines remain fundamental to consistently compounding profitability across our franchise and successfully integrating new operations. With the financial strength and flexibility to continue to grow, we are well-positioned to continue to deliver value for our shareholders and our customers.”
The transaction is anticipated to be finalized later this year, pending the fulfillment of customary closing conditions.
How Did Vulcan Materials Perform in Q3?
Vulcan Materials reported its third-quarter earnings results on Oct. 30. The company’s revenue fell 8.7% year-over-year to $2 billion, missing Wall Street’s estimates by $20 million. Its adjusted earnings per share stood at $2.22, missing expectations by $0.09.
The company shipped 57.7 tons of aggregates during the quarter, down from 64.0 tons in the same period last year, a decrease that management attributed to extreme weather events. Despite the challenges with volume, the pricing environment continued to be favorable. The firm’s freight-adjusted average selling prices per ton rose 10% year-over-year to $21.27, with increases observed across various geographies. This resulted in a smaller decline in revenue from the aggregates segment, from $1.63 billion last year to $1.57 billion this year.
A positive highlight was revenue from asphalt. Sales increased by approximately 10% year-over-year to $381.1 million. This increase occurred as asphalt volumes slightly rose from 4 tons to 4.1 tons and asphalt mix prices climbed from $76.22 per ton to $80.88 per ton. The primary drag on total revenue stemmed from the concrete segment. Concrete revenue plunged 52.2% year-over-year to $174.4 million, despite an increase in pricing from $169.98 per cubic yard to $185.61 per cubic yard. The decrease was due to a drop in total cubic yards sold, which fell from 2.1 million to just 0.9 million. However, it’s important to note that the previous year’s third quarter included results from concrete assets in Texas that have since been divested.
VMC generated $581 million of adjusted EBITDA in the quarter, a slight decline from the previous year, due to lower aggregate shipments and last year’s earnings contribution from the now-divested Texas concrete business. Still, its gross profit margin improved by 120 basis points to 28.2%, and the adjusted EBITDA margin expanded by 150 basis points to 29%, despite disruptions from four hurricanes impacting its industry-leading Southeast footprint.
Vulcan’s strong and flexible balance sheet positions it well for growth. As of Sept. 30, Vulcan’s net debt to trailing 12 months adjusted EBITDA leverage stood at 1.5x, providing ample investment capacity within its target leverage range of 2x to 2.5x to fund the Wake Stone acquisition and other growth initiatives that will generate long-term value for shareholders.
VMC remains committed to improving its return on invested capital, which reached 16.1% in Q3. This represents a 70 basis point improvement over the last 12 months, achieved by generating higher adjusted EBITDA on lower average invested capital.
Looking ahead, management remains confident that the company will end the year strong. For fiscal 2024, adjusted EBITDA is expected to be around $2 billion.
CEO Hill said, “As we look to 2025, we expect aggregates price to improve high-single digits, cost to benefit from our Vulcan Way of Operating disciplines and moderating inflation and, most importantly, cash gross profit per ton to continue expanding at double-digit levels. A demand backdrop underpinned by growth in public construction activity and an improving private demand environment should lead to volume growth in 2025. Our steadfast focus to execute at the highest level - both commercially and operationally - positions us well to capitalize on improving volume and grow earnings.”
Analysts tracking the company project that its EPS will remain roughly flat year-over-year at $7.20 in fiscal 2024. At the same time, Wall Street expects VMC’s revenue to drop by 5.18% year-over-year to $7.38 billion.
VMC Stock Valuation and Dividend Yield
Vulcan Materials boasts a track record of paying dividends for 35 consecutive years, exceeding the sector median of 10.9 years. On Oct. 11, VMC declared a quarterly cash dividend of $0.46 per share, in line with the previous, to be paid to shareholders on Nov. 27. Its annualized dividend of $1.84 per share translates to a dividend yield of 0.64%, and with a moderate payout ratio of 26.50%, the company has ample scope to raise its dividend in the future. Notably, Vulcan distributed $60.8 million in dividends to shareholders during the third quarter, marking a 6% increase from the previous year.
In terms of valuation, the stock looks quite expensive at current levels. VMC stock currently trades at 40.50 times the consensus earnings estimate for 2024, well above the sector median of 17.29x and its own five-year average of 31.02x. This trend is also evident in its other key valuation metrics such as forward Price/Cash Flow and forward EV/EBITDA. It is important to note that the current valuation hinges on expectations of continued growth, meaning that any external or internal factors that could reduce earnings may lead to lower price levels from these valuations.
However, given that the U.S. economy remains strong and the Fed is expected to continue reducing interest rates in the upcoming quarters, the likelihood of negative external factors affecting its earnings is currently minimal.
Options Market Sentiment on Vulcan Materials Stock
Looking at the option chain for Dec. 20, 2024, the $290.00 CALL option has a bid/ask spread of $7.20/$7.70, while the $290.00 PUT option displays a spread of $8.00/$8.50. Remember that this option strike is nearest to the current stock price. As of now, let’s calculate the expected price movement by using the midpoint prices of these options:
8.25 (290.00 put) + 7.45 (290.00 call) = 15.70/287.71 = 5.5%
Using the long straddle strategy and based on current prices, the options market suggests that VMC stock could move approximately 6% up or down by the December options expiration from the $290.00 strike price. That would place the stock in a trading range of about $271.90 to $303.50.
Notably, at the $290.00 strike price, call options outnumber put options by a ratio of approximately 4.2 to 1, with 174 open calls versus 41 open puts. Although there are a relatively small number of open contracts, this difference indicates that options market traders are optimistic about VMC stock and anticipate a further increase in its price.
What Do Analysts Expect For VMC Stock?
Vulcan Materials stock has a consensus “Moderate Buy” rating. Out of the 19 analysts offering recommendations for VMC stock, 12 rate it as a “Strong Buy,” one as a “Moderate Buy,” and six analysts assign a “Hold” rating.
Notably, the stock trades close to its average price target of $296.29. However, the Street-high target price of $349.00, set by UBS, indicates a potential upside of 21.3% from current levels.
