Vulcan (VMC): Mason Hawkins Is Getting Out Of This Materials Company

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Vulcan Materials Company (NYSE:VMC) saw Mason Hawkins of Southeastern Asset Management unload some of his shares per a 13D filing with the SEC last week. At the end of the third quarter, Southeastern owned 12.1 million shares. The recent sale puts Southeastern’s ownership to 9.9 million – an 18% selloff. Southeastern now owns 7.7% of Vulcan, which is down from its previous 9.3% ownership. Hawkins founded Tennessee-based Southeastern Asset Management in 1975, which manages roughly $32 billion in assets and remains an employee-owned firm.

Mason Hawkins

Generally speaking, Southeastern takes a long-term view, not focusing on the interim ups and downs of the markets. We believe that Southeastern is taking the stand that the long-term trend for industrials might be in decline. The Vulcan sale comes after Southeastern announced a selloff of other major materials company Cemex SAD de CV (NYSE:CX) last month. Southeastern now owns 13% of the cement company, versus its previous ownership of 17%. Cemex expects to see cement volume up 8.5% in FY2013, but earnings remain uncertain, as shares trade at incalculable trailing and forward P/E ratios. To help boost its capital structure, Cemex expects to continue its asset sale campaign through 2015. Sales of non-core U.S. assets will remain at a target of $40 million per year over this time.

When looking at Vulcan, analysts forecast the company to post a revenue decrease of 10% in 2013 after a relatively flat year in 2012. This comes on continued weakening of demand for construction aggregates due to industry-wide weakness. Vulcan has embarked on cost reductions to help mitigate the volume decline. Government stimulus spending slowdowns and a delayed ramp up in highway spending are expected to be other key drags on Vulcan’s earnings. Billionaire Steven Cohen of SAC Capital was also taking some of his shares off the table, dumping 70% of his stake during 3Q (check out Cohen’s top moves).

Vulcan is the nation’s largest producer of aggregates in the United States and recently denied a bid from Martin Marietta Materials, Inc. (NYSE:MLM) – the second largest aggregates producer. Martin announced a hostile offer for Vulcan nearly a year ago that equated to around $38.50 per share for Vulcan shareholders. The deal was refuted by Vulcan, and for good reason; the stock now trades north of $50. There is speculation that Martin might be interested in reassessing a deal that would bring the two companies together in the future. Any such deal would provide vast cost synergies, but we remain cautious for the time being.

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