Vulcan Materials Falls After Q4 Report

This is the kind of business that is particularly sensitive to the economy, so seeing these drops isn't radically surprising. Of course, I'm sure shareholders aren't too fond of the miss on the bottom line.

Management has been very careful to make cash flow the story. The team is wise to focus on money generation, as it really is the most important part of any company's tale. In this case, yearly cash from operations remained stable, and free cash flow took a significant jump, rising from roughly $80 million to a little over $340 million. Obviously, capital expenditures were cut to produce such a soaring amount of funds.

All Vulcan can do now is wait out the negative effects of the economic climate. The question is, how does the stock look?

Here's some recent trading history. After I examined the company's Q3 earnings back in November, the stock rose several dollars, only to eventually retreat (today, the shares are lower than when the Q3 numbers came out). Same thing happened after the Q2 report back in August -- stock went up, then down.

I'm not so fond of the price action of this company, and I think when one adds the macro fundamentals to the story, one comes away with a situation that might be too risky at this time.

I do like the conservative approach to cash flow, and I do believe that Vulcan will eventually do well once the economy fully straightens out. If the stock pulls back further, I certainly understand the potential for a trade. Considering the volatile action of the markets at large these days, it would have to be a significant pull back for me to perceive a solid margin of safety.

Disclosure: I don't own any company mentioned; positions can change without notice.