NEW YORK (AP) -- Shares of Vulcan Materials Co. rose Tuesday after Sterne Agee upgraded the stock and said long-term prospects for the company outweigh concern about the short-term impact of the sluggish economy on construction.
THE SPARK: Sterne Agee upgraded the shares to "Buy" from "Neutral" and set a target price of $55, or 21 percent above Monday's closing price.
THE BIG PICTURE: Vulcan sells gravel and sand used in construction, and it should be benefiting from factors such as an increase in home starts, which jumped last month to their highest level since June 2008. But much of the March gain was in apartments — starts of single-family homes actually fell — and applications for building permits, used to forecast future construction, slipped after a strong February.
Amid the mixed signals, Vulcan was one of the companies caught up in a sell-off Monday, as investors pulled out of construction-materials companies after a survey indicated a drop in confidence among homebuilders.
THE ANALYSIS: Sterne Agee's Todd Vencil said a 3-month slump in Vulcan shares was an overreaction to near-term economic fears. He said the housing in some key Vulcan markets, including Florida and Arizona, was picking up.
"Our meetings with management two weeks ago left us with the clear feeling that the longer-term outlook for the company's business is excellent, as we believe U.S. construction markets have several years of solid growth ahead of them," Vencil wrote in a note to clients.
SHARE ACTION: In late morning trading, the shares gained $1.94, or 4.3 percent, to $47.53., after earlier spiking to $48.29. The stock had been sliding since hitting a 52-week high of $59.48 in January. Through Monday, they were down 12 percent in 2013.