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June 25, 2014
11:23 EDTVMIValmont sinks after cutting earnings guidance
Shares of Valmont Industries (VMI), a producer of fabricated metal products, are falling after the company lowered its fiscal 2014 earnings per share outlook. Its second quarter EPS outlook also fell shy of analysts' consensus estimates. WHAT'S NEW: Last night, Valmont lowered its FY14 EPS outlook to $9.35-$9.65 from $10.00-$10.50, compared to consensus of $10.37. The company also forecast Q2 EPS of $2.35-$2.40, which was significantly below the consensus of $2.79. The company noted the following in lowering its guidance: "In the Utility Support Structures Segment, the mix and timing of projects currently provide less favorable profits than what we have seen in recent years and less than our prior expectations for this year. We now expect operating income as a percentage of sales for this segment to be in the range of 12% to 14% both for the second quarter and for the year. In the Coatings Segment, the weaker Australian economy has negatively affected the profitability of our galvanizing businesses in that country and the less favorable exchange rate has dampened the results from all our Australian operations. As expected, our Irrigation Segment will have an unfavorable comparison for the second quarter compared to an exceptionally strong second quarter in 2013. We expect improved profits from our Engineered Infrastructure Products Segment." ANALYST REACTION: This morning, analyst commentary was mixed. Research firm Wedbush downgraded Valmont to Neutral from Outperform, citing the company's lowered FY14 guidance. Conversely, DA Davidson said Valmont should be bought on weakness. The firm thinks the company's irrigation business can stabilize in the second half of the year, while the company could also be boosted by a share repurchase program, acquisitions, or new growth programs. The firm believes that the company has several positive attributes, including attractive exposure to infrastructure end markets and long-term growth potential in efficient irrigation products. It kept a Buy rating on the shares. PRICE ACTION: In late morning trading, Valmont fell $11.66, or about 7.3%, to $148.63 on nearly twice its average daily trading volume. Including today's pull back, the stock is up about 6% over the past 12 months.
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