Vulcan Materials: On the Mend

Vulcan's sin: being a leading producer of cement in Florida, a market that tanked big-time when the housing boom ended. What Wall Street "forgot," was that Vulcan is also a major producer of asphalt and concrete, and that it shipped aggregates to 23 states, as well as to Mexico, the Bahamas, Canada and Chile.

Look for Vulcan's revenue to increase 7% to 10% in 2010, primarily due to highway construction projects and related public infrastructure work; housing-related work will improve slightly, but it is a clouded forecast, given the uncertain nature of the U.S. housing sector's recovery.

The First Call FY2010/FY2011 EPS estimates for Vulcan are 39 cents to $1.41. The 2010 EPS estimate looks about 10& to 15% low, according to my analysis.

Technically, as noted, Vulcan's shares held support near $42, and have since moved back above the key 50-day moving average.

2010 Outlook: I view Vulcan as a long-term play, but if investors are looking to sell VMC within the year, I wouldn't buy the shares, as the 1-year risk/return is not favorable.

Stock Analysis: I consider Vulcan Materials to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 25% position in VMC now; then buy another 25% in one month if U.S. and global economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 50% of my VMC position before June 2010 and I'd put a sell/stop loss at $37.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.