IIJA Funding And Sunbelt Projects Will Drive Long-Term Demand

Key Takeaways

• Expanding infrastructure investment and a dominant presence in high-growth metros are fueling sustained revenue growth and strong pricing power for Vulcan Materials.
  
• Operational efficiencies, successful acquisitions, and rising demand from infrastructure and renewable projects are supporting margin expansion and long-term profitability.
  
• Delayed construction recovery, regional weather risks, public funding reliance, reduced capital investment, and acquisition integration challenges could constrain near-term revenue growth and margin improvement.

Catalysts

Produces and supplies construction aggregates in the United States.

• Accelerating infrastructure spending-driven by the ongoing rollout of IIJA funding, major state initiatives in core Southern and Sunbelt markets, and increasing local spending-is visibly expanding Vulcan's backlogs and contract awards; with over 60% of IIJA funds still to be spent and awards up over 20% in Vulcan-served regions, this points to multi-year growth in volumes and more predictable, compounding revenue.
  
• The company's dominant footprint in rapidly urbanizing and growing Sunbelt metros, coupled with a visible pipeline of large-scale public and private projects (notably data centers, highways, and non-residential), positions Vulcan to capture outsized volume recovery and expansion, directly benefiting revenue growth and sustaining robust pricing power.
  
• Sustained operational discipline and efficiency improvements-including tighter cost control, effective price realization, and automation-continue to boost unit gross profit per ton and drive margin expansion, even in low-volume environments; incremental volumes as end markets recover should provide meaningful leverage to net margins and EBITDA.
  
• Bolt-on acquisitions in key coastal and Sunbelt markets are integrating successfully, with price accretion already materializing; anticipated M&A acceleration paired with strong balance sheet capacity will further support earnings growth and enhance free cash flow generation.
  
• Structural tailwinds from infrastructure resilience and the transition to green/renewable projects are driving long-term demand for aggregates in roads, storm-resistant infrastructure, and energy sites, enhancing Vulcan's long-term volume outlook and supporting higher blended pricing, which should lift both top-line revenue and profitability.

Vulcan Materials Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Vulcan Materials's revenue will grow by 8.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 12.6% today to 15.7% in 3 years time.
• Analysts expect earnings to reach $1.5 billion (and earnings per share of $11.45) by about September 2028, up from $958.1 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 33.2x on those 2028 earnings, down from 40.3x today. This future PE is greater than the current PE for the US Basic Materials industry at 24.1x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.76%, as per the Simply Wall St company report.

Vulcan Materials Future Earnings Per Share Growth

Risks

• Persistent delays and project deferrals in single-family residential construction, along with ongoing affordability challenges, could continue to weigh on residential aggregate volumes-potentially constraining revenue growth if that major end market does not recover as projected.
  
• Greater reliance on Southeast markets, which experienced outsized negative impacts from extreme weather events, exposes Vulcan to heightened regional weather volatility and climate risk-raising the potential for future unanticipated disruptions to volumes, margins, and earnings.
  
• Reduced CapEx guidance (lowered from prior expectations of $750-800M to around $700M) due to project timeline delays may indicate ongoing operational or permitting hurdles, potentially leading to slower asset modernization and affecting long-term cost competitiveness and free cash flow.
  
• Public infrastructure growth is heavily reliant on continued government funding such as IIJA and future highway bills-any changes in political priorities, delays in funding dispersal, or failure to renew/expand such funding pose a risk to long-term revenue visibility and margin expansion.
  
• Recent acquisitions (especially in North Carolina and California) face a lag in reaching Vulcan's pricing standards, and unfavorable geographic and product mix due to these acquisitions and weather-impacted shipments could compress average selling prices or delay anticipated margin improvements, impacting near
• to mid-term profitability.

Valuation

• The analysts have a consensus price target of $304.048 for Vulcan Materials based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $340.0, and the most bearish reporting a price target of just $190.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $9.6 billion, earnings will come to $1.5 billion, and it would be trading on a PE ratio of 33.2x, assuming you use a discount rate of 7.8%.
• Given the current share price of $292.44, the analyst price target of $304.05 is 3.8% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.