UPDATE: Valmont Industries (VMI) Tops Q2 EPS by 56c, Revenues Beat; Offers 3Q Revenue Guidance Above Consensus
Valmont Industries (NYSE: VMI) reported Q2 EPS of $2.00, $0.56 better than the analyst estimate of $1.44. Revenue for the quarter came in at $688.8 million versus the consensus estimate of $653.87 million.
Second Quarter 2020 Highlights (all metrics compared to Second Quarter 2019 unless otherwise noted)
- Net Sales of $688.8 million declined 1.7%; excluding $13.7 million of unfavorable currency impacts, sales were similar to last year, as strong growth in Utility Support Structures was offset by lower sales in the Coatings segment due to COVID-19 impacts, as expected
- Operating Income of $43.4 million, or 6.3% of sales ($65.7 million or 9.5% adjusted1) compared to $61.5 million or 8.8% of sales last year; profitability improved in all segments except Coatings
- Diluted Earnings per Share of $1.06 ($2.00 adjusted1) compared to $1.82; GAAP EPS includes a $16.6 million pre-tax non-cash impairment charge against goodwill and trade names attributed to the Access Systems product line
- Generated strong operating cash flow of $88.3 million, driven by operating income and working capital management; cash and cash equivalents were $353.3 million at end of second quarter
- Completed two acquisitions in the Irrigation segment; purchased a majority stake in Solbras - Energia Solar do Brasil, and acquired 100% of the assets of PrecisionKingTM
- Received a large lattice structures order of approximately $17.0 million for the North American utility market
- Resumed operations at all Valmont manufacturing facilities
- Providing key assumptions and indications for the third quarter 2020
"Valmont delivered strong second quarter operating performance as our team persisted in serving customers despite COVID-19 challenges, including related shutdowns and economic restrictions," said Stephen G. Kaniewski, President and Chief Executive Officer. "Revenue and profitability were better than expected across all segments, as we successfully managed pricing and operational performance. We completed strategic capacity additions, which contributed to improved performance and revenue growth, particularly in the Utility Support Structures segment. Our consistent focus on liquidity and working capital management led to strong operating cash flows. Importantly, I want to thank all employees for their hard work and resiliency in producing products and providing services that support critical infrastructure sectors and food security around the world. As always, the safety and well-being of our employees remains our top priority."
GUIDANCE:
Valmont Industries sees Q3 2020 revenue of $680-700 million, versus the consensus of $670.08 million.
Although the pandemic's impacts on global economic factors and pace of economic recovery remain unclear, the Company is providing a greater level of transparency during this time, including key assumptions and indications for third quarter 2020, to help the financial community understand short-term impacts and expectations.
Key Assumptions
- Utility Support Structures sales estimate driven by higher sales in international businesses
- Tax rate of ~ 25.0%
- Unfavorable currency translation on net sales of $7.0M – $9.0M
- Positive operating cash flows
- Stable raw material costs and no significant supply chain interruptions
- No closures of large manufacturing facilities or workforce disruptions
Kaniewski continued, "Our quick and decisive actions at the outset of the pandemic allowed us to mitigate the severity of its impact on our operating and financial results through the first half of the year. We continue to work diligently and safely to provide our customers with the essential products and solutions they need. The global backlogs in our infrastructure businesses are solid, providing a good line of sight for third quarter sales, and our balance sheet is strong. We continue to closely monitor all discretionary spending and capital expenditures, with an additional emphasis on managing working capital and cash flow. Through the use of lean and agile, we will continue to aggressively drive operational efficiencies. We will successfully navigate through these uncertain times by focusing on employee safety and well-being, remaining flexible, and managing what we can control to drive long-term shareholder value."
For earnings history and earnings-related data on Valmont Industries (VMI) click here.