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Investing.com -- Fitch Ratings has upgraded Vulcan Materials Company’s (NYSE:VMC) Long-Term Issuer Default Rating to ’BBB+’ from ’BBB’ and improved its Short-Term IDR and commercial paper ratings to ’F1’ from ’F2’, with a Stable outlook.
The upgrade reflects VMC’s strong EBITDA and free cash flow margins, with Fitch expecting the company to maintain EBITDA leverage around 2.0x or lower. The rating agency cited VMC’s leading market position, diverse quarry network across 23 states, high barriers to entry, and strong financial flexibility as positive factors.
Vulcan has demonstrated consistent deleveraging following acquisitions. After completing $2.3 billion in acquisitions in 2024 that pushed leverage to about 2.6x, the company reduced this to 2.2x for the twelve months ended June 30, 2025. Fitch expects leverage will reach or fall below management’s target range of 2.0x-2.5x in the coming years.
The company’s EBITDA margin improved 200 basis points in 2024, with Fitch projecting an additional 100-150 basis points improvement in 2025, supported by strong pricing and operational efficiencies. EBITDA margins are expected to stabilize around 30% in the next few years, while free cash flow margin is forecast between 9%-10% in 2025 and 2026.
As the largest producer of construction aggregates in the U.S., Vulcan operates 423 active aggregates facilities serving markets in 23 states, Washington, D.C., and local markets in the Bahamas, Canada, and Mexico. Management believes 90% of its revenue comes from markets where the company holds the first or second position.
Fitch expects continued softness in the U.S. construction environment in 2025, with residential and non-residential construction decreasing slightly before improving marginally in 2026. Public construction spending is forecast to grow modestly. Despite this, Fitch projects VMC’s revenues will improve 7%-8% in 2025, driven by acquisitions and higher pricing.
The rating agency noted that Vulcan’s leverage metrics are currently slightly better than peer Martin Marietta Materials, Inc., whose EBITDA leverage was 2.5x for the period ended June 30, 2025.
For a potential upgrade, Fitch would look for EBITDA leverage sustained below 2.0x long-term and cash flow from operations minus capital expenditures to debt sustained above 20%.
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