Vulcan Materials (VMC)

Construction materials company Vulcan Materials (NYSE:VMC) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 14.4% year on year to $2.29 billion. Its non-GAAP profit of $2.84 per share was 4.5% above analysts’ consensus estimates.

Company Overview

Founded in 1909, Vulcan Materials (NYSE:VMC) is a producer of construction aggregates, primarily crushed stone, sand, and gravel.

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.

Competitors in the construction materials industry include Martin Marietta (NYSE:MLM), Eagle Materials (NYSE:EXP), and CEMEX (NYSE:CX)

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Luckily, Vulcan Materials’s sales grew at a solid 10.1% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Vulcan Materials’s recent performance shows its demand has slowed as its annualized revenue growth of 1.3% over the last two years was below its five-year trend.

Vulcan Materials also discloses its number of tons shipped, which reached 64.7 million in the latest quarter. Over the last two years, Vulcan Materials’s tons shipped averaged 1.6% year-on-year declines. Because this number is lower than its revenue growth during the same period, we can see the company’s monetization has risen.

This quarter, Vulcan Materials reported year-on-year revenue growth of 14.4%, and its $2.29 billion of revenue exceeded Wall Street’s estimates by 0.8%.

Looking ahead, sell-side analysts expect revenue to grow 8.3% over the next 12 months, an improvement versus the last two years. This projection is above the sector average and implies its newer products and services will fuel better top-line performance.

For industrials businesses, cost of sales is usually comprised of the direct labor, raw materials, and supplies needed to offer a product or service. These costs can be impacted by inflation and supply chain dynamics in the short term and a company’s purchasing power and scale over the long term.

Vulcan Materials has bad unit economics for an industrials company, giving it less room to reinvest and develop new offerings. As you can see below, it averaged a 25.2% gross margin over the last five years. Said differently, Vulcan Materials had to pay a chunky $74.82 to its suppliers for every $100 in revenue.

This quarter, Vulcan Materials’s gross profit margin was 30.4%, up 2.2 percentage points year on year. Vulcan Materials’s full-year margin has also been trending up over the past 12 months, increasing by 2.1 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

Vulcan Materials has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 17.6%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.

Looking at the trend in its profitability, Vulcan Materials’s operating margin rose by 1.4 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, Vulcan Materials generated an operating margin profit margin of 23.7%, up 6.9 percentage points year on year. The increase was solid, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

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.

Vulcan Materials’s EPS grew at a remarkable 12.4% compounded annual growth rate over the last five years, higher than its 10.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into the nuances of Vulcan Materials’s earnings can give us a better understanding of its performance. As we mentioned earlier, Vulcan Materials’s operating margin expanded by 1.4 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

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

For Vulcan Materials, its two-year annual EPS growth of 13.1% is similar to its five-year trend, implying strong and stable earnings power.

In Q3, Vulcan Materials reported adjusted EPS of $2.84, up from $2.22 in the same quarter last year. This print beat analysts’ estimates by 4.5%. Over the next 12 months, Wall Street expects Vulcan Materials’s full-year EPS of $8.46 to grow 13.5%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Vulcan Materials has shown robust cash profitability, enabling it to comfortably ride out cyclical downturns while investing in plenty of new offerings and returning capital to investors. The company’s free cash flow margin averaged 10% over the last five years, quite impressive for an industrials business.

Taking a step back, we can see that Vulcan Materials’s margin expanded by 1.6 percentage points during that time. This is encouraging because it gives the company more optionality.

Vulcan Materials’s free cash flow clocked in at $454.8 million in Q3, equivalent to a 19.8% margin. The company’s cash profitability regressed as it was 5 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 capital expenditures can be seasonal and companies often stockpile inventory in anticipation of higher demand, leading to short-term swings. Long-term trends trump temporary fluctuations.

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).

Vulcan Materials historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 9.5%, somewhat low compared to the best industrials companies that consistently pump out 20%+.

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. Fortunately, Vulcan Materials’s ROIC averaged 2.1 percentage point increases over the last few years. This is a good sign, and if its returns keep rising, there’s a chance it could evolve into an investable business.

Vulcan Materials reported $191.3 million of cash and $4.87 billion 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 $2.36 billion of EBITDA over the last 12 months, we view Vulcan Materials’s 2.0× net-debt-to-EBITDA ratio as safe. We also see its $226.8 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 Vulcan Materials beat analysts’ EBITDA expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. On the other hand, its full-year EBITDA guidance slightly missed. Zooming out, we think this was a mixed quarter. The stock remained flat at $295 immediately after reporting.

Updated: December 4, 2025 at 10:46 PM EST

Before deciding whether to buy Vulcan Materials or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

There are some bright spots in Vulcan Materials’s fundamentals, but its business quality ultimately falls short. To kick things off, its revenue growth was solid over the last five years. And while Vulcan Materials’s gross margins are lower than its industrials peers, its impressive operating margins show it has a highly efficient business model.

Vulcan Materials’s P/E ratio based on the next 12 months is 31x. Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $317.70 on the company (compared to the current share price of $299.05).