Valmont (VMI)

Infrastructure and agriculture equipment manufacturer Valmont Industries (NYSE:VMI) reported Q2 CY2025 results exceeding the market’s revenue expectations, with sales up 1% year on year to $1.05 billion. The company expects the full year’s revenue to be around $4.1 billion, close to analysts’ estimates. Its non-GAAP profit of $4.88 per share was 2.1% above analysts’ consensus estimates.

Company Overview

Credited with an invention in the 1950s that improved crop yields, Valmont (NYSE:VMI) provides engineered products and infrastructure services for the agricultural industry.

Traditionally, building materials companies have built competitive advantages with economies of scale, brand recognition, and strong relationships with builders and contractors. More recently, advances to address labor availability and job site productivity have spurred innovation. Additionally, companies in the space that can produce more energy-efficient materials have opportunities to take share. However, these companies are at the whim of construction volumes, which tend to be cyclical and can be impacted heavily by economic factors such as interest rates. Additionally, the costs of raw materials can be driven by a myriad of worldwide factors and greatly influence the profitability of building materials companies.

Top competitors in Valmont’s established markets include AZZ (NYSE:AZZ), which competes with Valmont’s metal coatings offerings, Lindsay (NYSE:LNN), which competes with Valmont in the agricultural sector, and American Tower (NYSE:AMT), which competes with Valmont in its other various infrastructure markets.

A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Thankfully, Valmont’s 8.3% annualized revenue growth over the last five years was decent. Its growth was slightly above the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Valmont’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 3% over the last two years.

This quarter, Valmont reported modest year-on-year revenue growth of 1% but beat Wall Street’s estimates by 1.7%.

Looking ahead, sell-side analysts expect revenue to grow 1.8% over the next 12 months. Although this projection indicates its newer products and services will spur better top-line performance, it is still below average for the sector. At least the company is tracking well in other measures of financial health.

Valmont’s gross margin is slightly below the average industrials company, giving it less room to invest in areas such as research and development. As you can see below, it averaged a 28.1% gross margin over the last five years. That means Valmont paid its suppliers a lot of money ($71.89 for every $100 in revenue) to run its business.

In Q2, Valmont produced a 30.6% gross profit margin, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Valmont has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 9.2%, higher than the broader industrials sector.

Analyzing the trend in its profitability, Valmont’s operating margin rose by 1.3 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, Valmont generated an operating margin profit margin of 2.8%, down 11.4 percentage points year on year. Since Valmont’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Valmont’s EPS grew at an astounding 18% compounded annual growth rate over the last five years, higher than its 8.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into the nuances of Valmont’s earnings can give us a better understanding of its performance. As we mentioned earlier, Valmont’s operating margin declined this quarter but expanded by 1.3 percentage points over the last five years. Its share count also shrank by 7.4%, and these factors together are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Valmont, its two-year annual EPS growth of 6.8% was lower than its five-year trend. This wasn’t great, but at least the company was successful in other measures of financial health.

In Q2, Valmont reported EPS at $4.88, up from $4.76 in the same quarter last year. This print beat analysts’ estimates by 2.1%. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Valmont has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 6% over the last five years, slightly better than the broader industrials sector.

Taking a step back, we can see that Valmont’s margin expanded by 9 percentage points during that time. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability.

Valmont’s free cash flow clocked in at $96.06 million in Q2, equivalent to a 9.1% margin. The company’s cash profitability regressed as it was 1.7 percentage points lower than in the same quarter last year, but it’s still above its five-year average. We wouldn’t read too much into this quarter’s decline because investment needs can be seasonal, leading to short-term swings. Long-term trends are more important.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Valmont’s five-year average ROIC was 12.2%, higher than most industrials businesses. This illustrates its management team’s ability to invest in profitable growth opportunities and generate value for shareholders.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Valmont’s ROIC averaged 1.1 percentage point decreases each year. Only time will tell if its new bets can bear fruit and potentially reverse the trend.

Valmont reported $208.5 million of cash and $861.1 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $488.8 million of EBITDA over the last 12 months, we view Valmont’s 1.3× net-debt-to-EBITDA ratio as safe. We also see its $20.5 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see Valmont beat analysts’ revenue and EPS expectations this quarter. On the other hand, its full-year EPS guidance fell slightly short of Wall Street’s estimates. Overall, this quarter was mixed. The stock traded up 1.7% to $337.90 immediately following the results.

Updated: July 27, 2025 at 11:05 PM EDT

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Valmont.

Valmont’s business quality ultimately falls short of our standards. Although its revenue growth was good over the last five years, it’s expected to deteriorate over the next 12 months and its organic revenue declined. And while the company’s rising cash profitability gives it more optionality, the downside is its gross margins are lower than its industrials peers.

Valmont’s EV-to-EBITDA ratio based on the next 12 months is 22.3x. This multiple tells us a lot of good news is priced in - we think other companies feature superior fundamentals at the moment.

Wall Street analysts have a consensus one-year price target of $393.33 on the company (compared to the current share price of $361.43).