Valmont Industries (VMI) Tops Q4 EPS by 41c, Revenues Beat; Offers 1Q Revenue Guidance Above Consensus, FY21 EPS Guidance Above Consensus
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Valmont Industries (NYSE: VMI) reported Q4 EPS of $2.20, $0.41 better than the analyst estimate of $1.79. Revenue for the quarter came in at $798.4 million versus the consensus estimate of $724.76 million.
Fourth Quarter 2020 Highlights (all metrics compared to Fourth Quarter 2019 unless otherwise noted)
- Net Sales of $798.4 million increased 16.8% led primarily by significantly higher sales in Irrigation and Utility Support Structures
- Operating Income of $54.1 million, or 6.8% of sales ($68.8 million or 8.6% of sales adjusted1) compared to $50.8 million or 7.4% of sales last year
- Diluted Earnings per Share (EPS) improved to $1.68 ($2.20 adjusted1) compared to $1.51; GAAP EPS includes a ($0.38) impact related to the Voluntary One-Time Early Retirement Benefit Program
- Repurchased 190,000 shares of company stock in the fourth quarter for $28.5 million, at an average price of $149.93 per share
- Recognized a more favorable tax rate primarily due to a one-time benefit of a recently-enacted U.S. tax regulation, resulting in an EPS benefit of $0.05 per diluted share
- Record year-end backlog of more than $1.1 billion, reflecting strong market demand
- Commenced shipments for the recently-awarded, multi-year $240.0 million supply agreement to provide irrigation products and services for the Egypt market
- Completed the acquisition of the remaining 40% stake of Torrent® Engineering and Equipment in the Irrigation segment
"We achieved strong sales and earnings growth this quarter as we remained highly focused on execution and pricing across the portfolio, despite an extraordinary macroeconomic environment,” said Stephen G. Kaniewski, President and Chief Executive Officer. “Sales growth was driven by strong demand in the Utility Support Structures segment, including significantly higher sales of renewable energy products. Additionally, our Irrigation segment delivered strong growth in sales and operating income driven by improved farmer sentiment from higher agricultural commodity prices and first deliveries of the large, multi-year project for the Egypt market during the quarter. Performance in the both the Engineered Support Structures and Coatings segments continued to improve. We recognized another quarter of solid operating cash flows, driven by our strategic priorities for working capital management."
Kaniewski continued, “As we reflect on 2020, I want to thank our entire Valmont team of 10,000 global associates. Their hard work and dedication enabled us to achieve solid sales, operating profit, and earnings growth, as well as significant cash flow, demonstrating their agility to execute our strategy for long-term profitable growth, even in an unprecedented environment. The safety of our employees and commitments to our customers remain our top priorities. I\'m very proud of our global team\'s continued resilience in safely navigating COVID-19 while supporting critical infrastructure sectors and food security around the world. As we approach our 75th year as a company, we have elevated ESG to permeate throughout our entire business. Our long-standing tagline of \'Conserving Resources. Improving Life.®\' fully encompasses our purpose as a Company, and demonstrates our commitment to helping advance a more resilient and sustainable world.”
Valmont Industries sees Q1 2021 revenue of $740-760 million, versus the consensus of $708.8 million.
Valmont Industries sees FY2021 EPS of $9.00-$9.70, versus the consensus of $8.76.
First-Quarter and Full Year 2021 Financial Outlook and Key Assumptions
While certain aspects of the pandemic\'s impact on global economic factors and pace of economic recovery remain uncertain, the Company will continue to provide a greater level of transparency, including key assumptions and indications for first quarter 2021, to help the financial community understand short-term impacts and expectations. The Company is also providing certain key assumptions and indications for full-year 2021.
While improving visibility has enabled management to reinstate guidance for 2021, a wider than historical range has been provided for some metrics, to account for an operating environment that remains dynamic. Additionally, the Company is providing Irrigation segment sales estimates due to expected significantly higher sales led by the large project for Egypt, continued strong net farm income levels and positive farmer sentiment, and a robust Brazilian market.
1Q 2021 Financial Outlook
- 1Q Net Sales estimated to be $740.0 - $765.0 million, an increase of 10.0% - 13.0% vs. prior year
- 1Q Operating Profit Margin estimated to be 9.0% - 10.0%
- 1Q Irrigation segment sales estimated to be $235.0 - $245.0 million, an increase of 50.0% - 56.0% vs. prior year
Full Year 2021 Financial Outlook and Key Assumptions
- Net Sales estimated to increase 9.0% - 14.0% vs. prior year
- Favorable foreign currency translation impact of approximately 2.0% of Net Sales
- Irrigation segment sales estimated to significantly increase 27.0% - 30.0% vs. prior year
- In Utility Support Structures, significant raw material cost inflation will negatively impact gross profit margins in the first half of 2021
- Diluted Earnings per Share estimated to be $9.00 - $9.70
- Tax rate between 24.0% - 25.0%
- Capital expenditures to be in the range of $110 - $120 million to support strategic growth initiatives and Industry 4.0 advanced manufacturing initiatives
- No closures of large manufacturing facilities, workforce disruptions, or significant supply chain interruptions due to COVID-19
Further, the Company has made the decision to divest the Access Systems product line. During 2021, Valmont will continue to strategically evaluate certain product lines and geographic market presence across its businesses. If needed, adjustments to the 2021 financial outlook will be provided in future quarters.
Kaniewski added, "As we turn our focus to 2021, the safety and well-being of our employees remains our number one imperative, while we continue to execute and drive growth and performance. We are entering the year with a record backlog of more than $1.1 billion, and expect to benefit from market tailwinds across many of our global markets this year. Backlog in the Utility Support Structures segment remains at elevated levels, which is providing a good line of sight for us well into the year. Additionally, during first quarter we were awarded the third purchase order of approximately $65 million for the large project in the southeast U.S., providing good momentum as we start the year. In the Engineered Support Structures segment, we expect growing demand in wireless communications markets as 5G build-outs continue to ramp. Our Coatings business is trending in-line with improving industrial production levels. In Irrigation, the large, multi-year project for Egypt and favorable market trends globally are providing strong momentum, and improved net farm income is leading to positive grower sentiment. Across the portfolio, we have already implemented pricing strategies to recover the impact of unprecedented raw material cost increases. Additionally, our strong balance sheet and cash flows give us flexibility to execute our long-term strategic plan. Our strategy remains focused on long-term growth, and an organizational emphasis on ESG principles, Return on Invested Capital, Operational Excellence and strengthening our organization for the future. We look forward to delivering another year of strong returns to our shareholders in 2021."
For earnings history and earnings-related data on Valmont Industries (VMI) click here.
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