Vulcan Materials Company (VMC) Operations Permit Revoked, Loop Capital Describes Whats Next

Loop Capital analyst Garik Shmois reiterated a Buy rating and $250.00 price target on Vulcan Materials Company (NYSE: VMC) after the Mexican government suspended the 3-year customs permit that was granted back in March. Officials ordered the quarry to shut down on May 5th, and on Friday, suspended the permit altogether.

The analyst stated "A decision to maintain or revoke the permit is expected within the next several weeks. It’s unclear what recourse VMC has considering the Mexican government appears to have a wide latitude in suspending permits/closing operations. All told, if the permits are not reinstated, VMC estimates an $80-100M, or 5% impact to FY22E EBITDA guidance of $1.72-1.82B. While the permanent removal of the permit is an obvious negative considering VMC is the largest aggregates producer in the Gulf Coast, the Sac Tun operations are the company’s largest and arguably most profitably, and replacement of the lost tonnage through adjacent facilities will be lower margin and may not be completely substituted, we think the recent pullback in the shares is overdone as all else equal, the ~10% decline in the shares on the two days of negative headlines is more than the what we estimate as a 6-7% impact to full year EBITDA should the permits be permanently revoked."

For an analyst ratings summary and ratings history on Vulcan Materials Company click here. For more ratings news on Vulcan Materials Company click here.

Shares of Vulcan Materials Company closed at $160.13 yesterday.

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