IIJA Spending And Sun Belt Urbanization Will Boost Aggregate Demand

Key Takeaways

• Public infrastructure investment, population shifts, and data center growth in Vulcan’s core regions are setting the stage for sustained demand and long-term revenue expansion.
  
• Technology upgrades and strategic acquisitions are driving cost efficiencies, expanded reserves, and enhanced profitability, positioning Vulcan to benefit from industry consolidation.
  
• Slowing demand, regulatory pressures, geographic concentration, alternative materials, and high capital needs all heighten risks to Vulcan's long-term growth and profitability.

Catalysts

Produces and supplies construction aggregates in the United States.

• The rollout of the Infrastructure Investment and Jobs Act (IIJA), with two-thirds of highway dollars still unspent, alongside increasing state and local transportation funding and major ballot initiatives, sets the stage for sustained growth in public infrastructure construction. This will significantly drive higher aggregates volumes and revenue for Vulcan over multiple years.
  
• Ongoing migration, urbanization, and population growth in Sun Belt and Southern states—key Vulcan markets—are fueling chronic housing shortages, infrastructure demands, and robust data center and logistics facility construction. As interest rates eventually decline and private construction rebounds, Vulcan is well positioned for a multi-year expansion in revenue from both residential and nonresidential projects.
  
• Strategic investments in plant automation and operational technology across Vulcan’s largest sites are beginning to yield sizable cost efficiencies and throughput gains, with further margin enhancements expected as full implementation matures through 2025 and 2026. These initiatives support structural improvement in EBITDA margins and net profitability, independent of cyclical volume changes.
  
• Bolt-on acquisitions continue to expand Vulcan’s geographic footprint and aggregates reserves, with recent deals already contributing materially to both revenue and EBITDA. The company’s strong balance sheet and disciplined capital allocation position it to capitalize on potential industry consolidation or distressed asset sales, driving incremental earnings growth and reducing market cyclicality.
  
• Accelerating demand for data centers—and the forthcoming wave of associated power generation construction, much of it within close proximity to Vulcan’s quarries—creates a powerful multi-year, aggregate-intensive end-market. This trend is expected to boost both volumes and pricing power, supporting sustained top-line and bottom-line growth on a scale that justifies bullish long-term projections.

Vulcan Materials Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Vulcan Materials compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Vulcan Materials's revenue will grow by 12.3% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 12.6% today to 15.0% in 3 years time.
• The bullish analysts expect earnings to reach $1.6 billion (and earnings per share of $12.2) by about July 2028, up from $944.9 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 34.6x on those 2028 earnings, down from 38.3x today. This future PE is greater than the current PE for the US Basic Materials industry at 20.1x.
• 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 7.2%, as per the Simply Wall St company report.

Vulcan Materials Future Earnings Per Share Growth

Risks

• Demographic shifts and slowing U.S. population growth could lead to reduced long-term infrastructure and residential construction demand, which may shrink Vulcan’s core addressable market and pressure revenue growth in the coming years.
  
• Stricter environmental regulations and the need for decarbonization could drive up compliance and operational costs for Vulcan, which would threaten net margins and potentially limit future project approvals.
  
• Vulcan’s heavy geographic concentration in the Southeast and Southwest US exposes revenues to regional economic downturns or policy changes, amplifying top-line volatility and increasing risk to sustained earnings growth.
  
• The rise of recycled aggregates, adoption of circular economy practices, and technological advancements in alternative construction materials (such as composites and 3D-printed structures) may erode long-term demand for Vulcan’s traditional aggregates, negatively impacting revenue and sales volumes.
  
• Persistent high capital intensity, with sustained investment needs for plant upgrades and automation, constrains Vulcan’s operational flexibility; if cost inflation accelerates or demand underperforms, this could compress net margins and depress returns on invested capital.

Valuation

• The assumed bullish price target for Vulcan Materials is $340.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Vulcan Materials's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• 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 $188.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $10.6 billion, earnings will come to $1.6 billion, and it would be trading on a PE ratio of 34.6x, assuming you use a discount rate of 7.2%.
• Given the current share price of $273.92, the bullish analyst price target of $340.0 is 19.4% higher.
• 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.