Shares of Vulcan Materials Company (NYSE:VMC) jumped more than 15% today after the company reported third-quarter 2018 earnings results. The country's largest producer of construction aggregates -- varying grades of gravel and the materials that comprise the bulk of cement -- delivered a 65% increase in net earnings and a 13% improvement in adjusted EBITDA compared to the same period of 2017.
The results are all the more remarkable considering the impact from severe weather, a 28% increase in diesel costs, and Wall Street's deepening pessimism on the fundamentals driving the construction industry. Prior to the earnings release, Vulcan Materials Company stock had dropped a whopping 36% since the beginning of the year. Now, the stock is down "only" 26% year to date.
As of 2 pm EDT, the stock had settled to a 14.5% gain.
Vulcan Materials Company chairman and CEO Tom Hill doesn't expect the third-quarter 2018 performance to be a fluke, saying,
We remain focused on executing at a high level and capitalizing on the above-average demand growth in our markets. The aggregates shipment growth rate seen in the third quarter should continue for the balance of the year. Aggregates pricing continues to show upward momentum and the rate of price growth will continue to improve during the fourth quarter given additional pricing actions implemented earlier this year in certain markets.
He may be right. In the first nine months of 2018 the business grew revenue, operating income, and net income 13%, 15%, and 43%, respectively, compared to the year-ago period. Furthermore, despite Wall Street's worries over what's ahead for the construction industry, most project orders being filled today have been in the industry backlog for several quarters. That provides reasonable visibility into demand for the next few quarters, which Vulcan Materials Company expects to be accompanied by continued momentum.
On the one hand, the business is making the most of its operational strength and expects to continue doing so as it approaches the middle of the industry's current cycle sometime in 2019. On the other hand, Wall Street seems content keeping a lid on infrastructure stocks such as Vulcan Materials Company -- even if reality proves that line of thinking wrong. Therefore, investors can likely expect volatility in the near future.