We are retaining our Outperform recommendation on Valmont Industries (VMI) based on its solid first-quarter 2012 results and upbeat outlook. Earnings of $1.96 per share topped the Zacks Consensus Estimate of $1.56. Profit more than doubled year-over-year on solid revenue growth.
Revenues spiked roughly 26% year-over-year to $717.4 million riding on strong growth in the Irrigation Segment. The Nebraska-based company saw healthy growth across the board in the quarter. Notably, revenues from its Irrigation and Utility Support Structures divisions zoomed 30% and 52% year-over-year, respectively.
Moving ahead, management envisions a strong performance in 2012. It expects utility demand to increase and the environment to remain favorable for the Irrigation division.
Moreover, Valmont expects operating performance at the Coatings segment to remain strong for the remainder of 2012. The Engineered Infrastructure Products segment, while challenged by the soft market conditions in Europe, is expected to be profitable this year. Based on these factors, management bumped up its earnings guidance for 2012 and now expects earnings per share to exceed $8.00 compared with the earlier view of $7.30 to $7.60.
Valmont makes fabricated metal products, metal and concrete pole and tower structures and mechanized irrigation systems in the U.S. and abroad. It competes with Lindsay Corporation (LNN) among others.
Valmont is witnessing significant strength in the irrigation market. The outlook for irrigation equipment is healthy while demand for Utility Support Structures is expected to rise. Healthy order activity and a growing backlog support expectations for a strong 2012.
Valmont’s Irrigation and Coatings segments are witnessing strong momentum recently. In the Irrigation unit, improving North American equipment demand is boosting net farm income. The company is also poised to savor incremental opportunity in the utility market. Besides, acquisitions will also support growth in 2012.
Our recommendation on the stock is in sync with a short-term Zacks #1 Rank (Strong Buy).
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