A Member of Pat McKeough’s Inner Circle recently asked for his advice on Vulcan Materials, the largest supplier of construction aggregates in the U.S.

Pat likes the firm’s dominant position in a high-barrier-to-entry industry, robust pricing power, and exposure to favorable demand trends driven by increased infrastructure spending and a recovery in non-residential construction. However, he notes the stock’s high valuation at 29.2 times forward earnings leaves limited room for upside if growth slows.

VULCAN MATERIALS CO. (Symbol VMC on New York; www.vulcanmaterials.com) operates mostly in the U.S. and is the nation’s largest supplier of construction aggregates. These are raw materials extracted from pits and quarries, and primarily include crushed stone, sand and gravel. The company is also a major producer of products that use aggregates, such as asphalt mix and ready-mixed concrete.

Vulcan has three operating segments: Aggregates (74% of revenue), Asphalt (18%), and Concrete (8%). The company has 397 aggregates sites in the U.S. In the latest year, it shipped 234 million tons of aggregates.

The company’s aggregates are used to build and repair infrastructure such as roads, bridges, waterworks and ports. They are also used to construct residential and non-residential buildings, such as manufacturing facilities, office buildings, schools, hospitals and churches.

End markets for its products include single and multi-family residential, commercial and government non-residential construction, and infrastructure-related projects such as highways and airports.

In December 2024, the company announced it had acquired Superior Ready Mix Concrete LP. That firm is a California-based aggregates producer with six operations in the state. The acquisition adds 50 years of aggregates reserves to the company’s California operations. Superior Ready-Mix Concrete also has two asphalt plants and 13 ready-mixed concrete locations in Southern California

The acquisition is part of Vulcan’s strategy to acquire aggregates businesses in growth areas of the U.S. The purchase price has not yet been disclosed.

In the three months ended December 31, 2024, Vulcan’s revenue increased 1.1%, to $1.85 billion from $1.83 billion a year earlier. Excluding one-time items, the company earned $2.17 a share, in the latest quarter. That was up 48.6% from $1.46.

Vulcan Materials: Infrastructure spending surge benefits growth potential

Vulcan raised its quarterly dividend by 6.5% with the March 2025 payment, to $0.49 a share from $0.46. The stock yields 0.8%.

The company’s outlook is positive. Aggregates are essential products with limited substitutes, favourable pricing, and high barriers to entry for new manufacturers. As the largest aggregates supplier in the U.S., Vulcan is well positioned to take advantage of its size and scale.

Note—the company is also capitalizing on strong demand trends now in play coast to coast. That demand is spurred by increased infrastructure investment as well as a recovery for light non-residential construction, large-scale energy projects, and U.S. manufacturing, more generally.

The stock trades at a high 29.2 times the forecast 2025 earnings per share of $8.34.

Recommendation in Pat’s Inner Circle: Vulcan Materials Co. is okay to hold.