Valmont Industries (NYSE: VMI) reported Q4 EPS of $1.66, $0.20 worse than the analyst estimate of $1.86. Revenue for the quarter came in at $683.6 million versus the consensus estimate of $706.37 million.

Fourth Quarter 2019 Highlights (all metrics compared to fourth quarter 2018 unless otherwise noted)

• Net Sales of $683.6 million, a decline of 2.0%; lower sales in international markets, particularly in Access Systems and international irrigation, were mostly offset by improvement across North American markets, led by Utility Support Structures
• Operating income of $55.0 million or 8.1% of sales, compared to $36.3 million or 5.2% of sales ($66.1 million adjusted1 or 9.5% of sales) largely due to a $7.5 million operating loss in Access Systems given the extremely weak Australia construction market, and lower international irrigation sales
• Diluted Earnings per Share of $1.66 compared to $0.80 ($1.87 adjusted1)
• Finalized an agreement to acquire the remaining 49% stake of AgSense® in the Irrigation segment, which is expected to close in first quarter 2020
• Commenced operations at the new European Center of Excellence steel structures facility in Poland, strengthening the Company's commitment to serve global markets and customers with strategic capital deployment

"Excluding the poor results from Access Systems in Australia, our performance in the fourth quarter was in line with our expectations," said Stephen G. Kaniewski, President and Chief Executive Officer. "In Engineered Support Structures, continued strong demand in North American transportation and wireless communication markets offset approximately $9.0 million in lower Access Systems sales. Utility Support Structures recognized its most profitable quarter this year and we delivered on our fourth quarter revenue commitment, increasing sales $27.0 million compared to third quarter 2019. We were satisfied with Coatings segment results despite the slowdown in U.S. industrial production levels. North American Irrigation sales were in line with expectations, while lower project business in international irrigation markets impacted growth. As expected, we generated strong operating cash flow during the quarter."

Kaniewski continued, "As we reflect on 2019, excluding the poor performance in our Access Systems business, our teams performed well. Increased momentum in our infrastructure businesses is supported by a solid backlog in Engineered Support Structures and a record high year-end backlog in Utility Support Structures. Despite lower U.S. industrial production levels in the second half of 2019, our Coatings business delivered good results for the year. Even with the impact of muted net farm income and trade uncertainty, our North American irrigation business performed well, supported by higher sales of advanced technology solutions. Our commitment to balanced capital deployment was demonstrated through strategic capital investments and acquisitions in support of global market growth."

GUIDANCE:

Valmont Industries sees FY2020 EPS of $7.30-$8.00, versus the consensus of $8.88.

2020 Key Assumptions

• Revenue Growth Primarily Organic
• No Material Impact Expected from Foreign Exchange Translation
• Raw Material and Freight Costs Expected to be Similar to 2019
• No Further Decline in Agricultural Market Fundamentals

"We are off to a solid start in 2020," said Mr. Kaniewski. "Sales and earnings growth is being driven by our infrastructure businesses, supported by solid backlogs. In the Engineered Support Structures segment, transportation market demand from continued government investments in infrastructure development will drive growth. In the wireless communication market, capital investments for 5G deployment will be somewhat delayed due to the T-Mobile/Sprint integration; however, we anticipate spending to increase in the second half of the year, accelerating into 2021. Considering these well-known delays and our record growth in 2019, we expect wireless communication sales to approach a 10.0% growth rate in 2020. Construction end-markets in Australia remain at recessionary levels and are not expected to significantly improve this year, impacting our Access Systems business. Our Utility segment entered the year with a record global backlog of nearly $500.0 million, supported by very strong market demand from ongoing investments in grid hardening and renewable energy sources. Strategic capacity additions in our North American steel structures plants are expected to increase volumes by approximately 5.0%, mostly in the second half of the year. We expect sales in our Coatings business to be similar to 2019 assuming relatively stable global industrial production levels. In the Irrigation segment, grower sentiment appears to be stabilizing in 2020, but we are not seeing a meaningful turnaround in demand as net farm income levels remain muted. Therefore, we are now projecting segment sales to be flat to down approximately 3.0% compared to 2019. While there is uncertainty around international projects, we are seeing continued market strength in Brazil."

Kaniewski continued, "Our unwavering commitment to continuous improvement and delivering higher returns on invested capital requires us to strategically position our businesses for long-term profitable growth. As such, we are continuing to evaluate some of the more challenged product lines across all segments, including Access Systems in Australia. We look forward to sharing more details next quarter."

For earnings history and earnings-related data on Valmont Industries (VMI) click here.