TNB Thomas & Betts Corp.

Valmont Industries Inc. (VMI) posted first-quarter 2012 net earnings of $1.96 per share, which more than doubled from the prior-year quarter’s earnings of 97 cents. The results also beat the Zacks Consensus Estimate of $1.56.

Revenues jumped 26.3% year over year to $717.4 million driven by higher sales at the company’s irrigation segment coupled with favorable weather conditions. Revenues exceeded the Zacks Consensus Estimate of $674 million.

Segment Review

Irrigation Segment: This segment was the biggest contributor to sales in the quarter and represented 27% of total sales. Revenues surged 30% year over year to $196.3 million, driven by higher volumes and improved manufacturing productivity. Slight improvement was witnessed in international sales.

The prices of crops remained high during the first quarter. The company is optimistic about its sales from this segment. However, dry weather conditions in the agricultural regions of North America raises concerns for the upcoming planting season. Operating income grew 61% to $38.4 million due to lower input costs, increased productivity and volume leverage.

Utility Support Structures Segment: The segment, which manufactures steel and concrete structures for the global electric utility industry, reported sales of $191.2 million, up 52% year over year, driven by increased demand to upgrade the North American transmission grid. Favorable weather in North America also led to increased production and shipping during the quarter. However, international sales declined in the quarter as they were offset by lower project sales in the emerging markets. Operating income jumped 86% to $25.1 million due to higher volumes and associated operating leverage.

The increased demand for electricity supports the need to add further capacity while improving the reliability of the North American electrical transmission grid. Valmont thus remains confident that the current demand will add innumerable new miles to the transmission grid over the next ten years, thereby supporting a very positive long-term outlook for its utility business.

Engineered Infrastructure Products Segment: Revenues from this segment were $197.9 million, up 17% year over year. In North America, commercial lighting sales improved. Transportation lighting and traffic product sales increased due to favorable weather condition. Sales of wireless communication structures and components also increased.

In international markets, European lighting and traffic structure sales continued to face challenging conditions. Sales in the Asia-Pacific region rose, driven by continued investment in the mining and industrial economies in the region. Highway safety product sales were higher in Australia. Sales of wireless communication and lighting products were flat in China. Operating income increased by more than three times to $8 million, based on higher sales and associated operating leverage.

Coatings Segment: The segment produces hot-dip galvanizing, anodizing and powder coatings to protect steel against rust. Sales of $82.8 million were up 13% from last year driven by increased demand. Demand rose in North America due to economic recovery and higher industrial production. The Asia-Pacific region also witnessed increased industrial activity in the quarter due to improved weather conditions. Operating income increased 60% to $16.5 million due to higher volumes, improved productivity and lower input costs.

Financial Position

As of March 31, 2012, cash and cash equivalents were $339.6 million versus $358.3 million at the end of March 26, 2011. The long-term debt excluding current installments amounted to $474.1 million as of March 31, 2012 compared with $484.5 million as of March 26, 2011.

Outlook

Management expects another strong performance in 2012. The company expects the Utility Segment demand to increase and the environment to remain favorable for the Irrigation Segment. Valmont believes that Irrigation segment results for the second half of the year will depend to a great extent on the outlook for the farm economy.

For the Engineered Infrastructure Products Segment, the company anticipates an unfavorable environment for lighting and traffic products. It further expects the market conditions in Europe to remain challenging. However, Valmont believes that the segment will continue to be profitable in 2012. Further, Valmont expects operating performance for the Coatings Segment to remain strong for the rest of 2012. With respect to the earnings outlook, management increased its forecast and expects earnings to exceed $8.00 per share for 2012.

We currently have a long-term Outperform recommendation on Valmont. The company competes with Lindsay Corporation (LNN) and Thomas and Betts Corp. (TNB). It maintains a Zacks #3 Rank, which translates into a short-term (1 to 3 months) Hold rating.

 
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