Vulcan gets vote of confidence

For those who follow the relationship between stock performance and industry success . . . This morning Longbow Research analyst David MacGregor raised his price target on Vulcan Materials (VMC), based on the company's demonstrated pricing strength, and positioning in key markets. As a result of its shares recently surpassing Longbow's prior target price, the company is raising its target on Vulcan to $98/share (+$20) and maintaining its BUY rating.

The price target of $98 reflects approximately 21x FY09 EPS forecast of $4.60 and 17x FY10E of $5.80. The shares of VMC are currently trading at 18.0x and 14.3x our respective FY09 and FY10 EPS forecasts. This compares to a historical forward P/E range of 11x-21x. "We like the long-term benefits of the combined VMC-FRK and believe the company is well positioned in the California and Florida markets to benefit longer term from a) attractive demographic prospects, b) publicly announced need for infrastructure improvements, and c) supply-constrained local markets.," McGregor said. "We remain impressed by VMC's ability to raise prices above historical "inflation plus" rates during FY08 when we estimate volumes for Legacy VMC to be down approximately 10 percent. In the growth phase of the next cycle, we believe pricing could potentially again increase by a low-teen annual percentage in part due to a) highly consolidated local markets, b) ever-rising replacement costs, and c) a growing market acceptance of significant yearly aggregates price increases." Your comment?