Executive Summary / Key Takeaways

• Valmont Industries (NYSE: VMI) is strategically positioned to capitalize on powerful, long-term secular megatrends in global infrastructure and agriculture, driving sustained demand for its engineered products and technology solutions.
• The company's Infrastructure segment, particularly Utility and Telecommunications, is experiencing robust growth fueled by energy transition, grid modernization, and data center expansion, with a strong backlog approaching $1.5 billion and significant capacity expansion initiatives underway.
• Despite near-term challenges in North American agriculture, Valmont is building resilience through high-margin aftermarket parts, advanced AgTech platforms like Accent 365 and ICON plus, and strong international project demand, aiming for double-digit operating margins in the segment by Q1 2026.
• Disciplined operational realignment, cost optimization efforts, and effective tariff mitigation strategies are enhancing profitability and efficiency, contributing to an expected cost-neutral impact from tariffs in fiscal 2025 and $22 million in annualized savings by 2026.
• Valmont maintains a strong financial position with healthy operating cash flows, a balanced capital allocation strategy including a $700 million share repurchase authorization, and a clear path to deliver $500 million to $700 million in revenue growth and $7 to $12 in additional EPS over the next three to four years.

A Foundation Built on Critical Infrastructure and Agricultural Productivity

Valmont Industries, Inc., founded in 1946 and headquartered in Omaha, Nebraska, has evolved into a diversified global manufacturer providing essential products and services for vital infrastructure and agricultural productivity. The company's enduring purpose is to conserve resources and improve life, a mission deeply embedded in its strategic decisions and technological advancements. Valmont's history includes strategic expansions and adaptations, such as the acquisition of Delta PLC in 2010 and consistent expansions of its share repurchase program since 2014, reflecting a commitment to shareholder value. More recently, the company has actively refined its business portfolio through targeted acquisitions and divestitures, including the sale of George Industries and its extractive business in 2024, and the strategic exit from the North American solar market in Q2 2025 to focus on higher-return opportunities.

Valmont operates primarily through two segments: Infrastructure and Agriculture. The company's market leadership is underpinned by significant barriers to entry in its core utility markets, which demand decades of engineering expertise, certified welding procedures, and deep material science knowledge. Utilities do not onboard suppliers overnight; each facility and product line requires rigorous qualification and approval, a process that few players possess the financial strength, supply chain depth, and technical capabilities to navigate. This high-bar approval environment, coupled with Valmont's proven field performance and trusted customer relationships, forms a formidable competitive moat.

The company's core differentiated technology lies in its engineered structures, which include steel, pre-stressed concrete, and composite poles for electrical transmission, substation, and distribution applications, as well as metal, steel, wood, aluminum, and composite poles for lighting and transportation. Valmont's proprietary galvanizing and coating technologies provide superior durability and corrosion resistance, extending product lifespans and reducing maintenance needs for customers. This directly counters service-focused competitors like MYR Group (MYRG) by offering long-lasting products that enhance gross margins and market share in utility segments. In precision agriculture, Valmont's innovations, such as the Accent 365 unified remote management app and the ICON plus control panel, bring full Accent 365 functionality to any pivot brand, expanding its addressable market and driving recurring revenue. These technologies offer tangible benefits by helping growers optimize water use, improve yields, and reduce waste, providing a compelling return on investment.

Powering the Future: Infrastructure Segment's Momentum

The Infrastructure segment is a cornerstone of Valmont's investment thesis, demonstrating robust performance driven by powerful secular megatrends. In Q3 2025, the segment reported net sales of $808.3 million, a 6.6% increase year-over-year, with an impressive operating income margin of 17.8%, up 150 basis points from the prior year. This growth is a direct result of pricing actions, an improved global cost structure, and a strategic focus on high-value offerings.

The Utility product line, Valmont's largest, is experiencing an unprecedented investment cycle. Demand is surging due to energy transition, electrification, data center expansion, manufacturing onshoring, and grid modernization. Market forecasts project transmission CapEx to grow at a 9% CAGR through 2029, with U.S. CapEx expected to exceed $212 billion in 2025, a 22% increase. Valmont's utility sales increased 12.3% in Q3 2025, driven by both pricing and higher volumes, reflecting strong demand and the company's ability to execute complex, large-scale projects. The company recently secured a $65 million extra high voltage project, underscoring its trusted position with leading engineering and construction firms. Valmont's strategic brownfield expansions, such as the Brenham, Texas factory, are on track to be fully operational by year-end 2025, with $78 million in CapEx deployed in North American infrastructure through Q3 2025, adding $95 million in annual revenue capacity. These investments are expected to yield over 20% operating margin on incremental revenue.

Telecommunications is another bright spot, with sales growing significantly by 37% in Q3 2025. This growth is supported by increased carrier and tower activity, technology upgrades, and 5G densification, aligning with Valmont's strategic positioning within carrier capital expenditure plans. The company's geographic presence, with eleven strategically located warehouses, provides a key competitive advantage, enabling next-day delivery to most of the U.S. market. This allows Valmont to compete effectively against broader service providers like Quanta Services (PWR) by offering specialized products with rapid deployment capabilities.

Conversely, the Lighting and Transportation (L&T) product line experienced a 3.4% decline in Q3 2025 sales, primarily due to continued weakness in the Asia Pacific market, softer North American lighting demand, and operational challenges. Management has initiated leadership and organizational changes to improve performance, aiming for a simpler structure and better alignment between operations and commercial teams. While the Solar product line saw a significant decline in sales due to the strategic exit from North America and downsizing in Brazil, Valmont maintains profitable solar operations in Italy, supported by EU funding and strong brand equity. Solar revenues are expected to stabilize at approximately 2% of total company revenues, with plans to consolidate it into another product line for reporting in 2026.

Cultivating Resilience: The Agriculture Segment's Evolution

The Agriculture segment, while facing cyclical headwinds, is strategically evolving to enhance resilience and long-term growth. In Q3 2025, the segment's sales decreased by 9% year-over-year to $241.3 million, with operating income declining to $23.2 million, or 9.7% of sales. This was primarily due to lower irrigation equipment volumes in North America, a consequence of significantly reduced storm-related replacement sales compared to the prior year, coupled with continued market softness driven by lower grain prices, trade policy uncertainty, and delayed government funding. The USDA projects 2025 crop receipts to decline about 2.5% for corn and soybeans, reflecting these pricing pressures. The segment also recorded an $11 million bad debt expense in Q3 2025, mainly in Brazil, due to tighter farmer credit and slower government financing. Excluding this one-time expense, the operating income margin would have been 14.1%.

Despite these challenges, Valmont is actively building a more resilient and globally balanced agriculture business. Aftermarket parts sales grew 15% year-over-year in Q3 2025 to approximately $52 million, driven by the successful rollout of a new e-commerce system for North American dealers, with an international expansion planned. This focus on high-margin aftermarket revenue is a key strategic priority. Technology Products and Services, including the Accent 365 unified remote management app, saw an 8% increase in revenue year-over-year, as farmers increasingly adopt these tools for irrigation management and productivity benefits. The new ICON plus control panel, a major addition to the Valley Tech Suite, expands Accent 365 functionality to any pivot brand, broadening Valmont's addressable market and driving recurring revenue.

Internationally, the Agriculture segment is demonstrating strength. Sales increased significantly in Q2 and the first half of 2025, led by strong project volumes in the EMEA region and higher volumes in Brazil, despite unfavorable foreign currency translation impacts. The long-term opportunity in Brazil remains exceptional, given the potential for multiple crops per year with mechanized irrigation and vast under-irrigated farmland. Valmont secured a new $45 million project in the Middle East in Q4 2024, expected to be completed in 2025, highlighting robust demand for food security initiatives in the region. While Q4 2025 may present another challenging quarter for Agriculture operating margins due to lingering issues, management anticipates a return to double-digit operating margins by Q1 2026 as these issues are resolved. Valmont's strong dealer network and proven ability to execute large-scale projects provide a competitive advantage against rivals like Lindsay Corporation (LNN), which specializes in irrigation systems.

Financial Strength and Strategic Capital Allocation

Valmont's financial performance reflects its disciplined execution and strategic focus. Consolidated net sales in Q3 2025 increased 2.5% year-over-year, with diluted earnings per share improving 21% to $4.98. For the first half of 2025, net sales were $2.02 billion, with a gross profit of $612.27 million. The company's gross profit margin in Q3 2025 was 30.4%, an 80 basis point improvement from the prior year. Consolidated SG&A expenses were flat year-over-year in Q3 2025 at $177 million, reflecting ongoing cost optimization efforts. Corporate SG&A expenses declined 6.4% to $25.1 million in Q3 2025, the lowest level in thirteen quarters, benefiting from organizational streamlining and reduced outside service provider costs.

Valmont maintains a robust liquidity position. The company generated healthy operating cash flows of $112.5 million in Q3 2025, ending the quarter with approximately $226 million in cash and net debt leverage remaining below 1x. For the first half of 2025, operating cash flows totaled $232.7 million, an increase from $154.1 million in the same period of 2024. The company's revolving credit facility was renewed in July 2025, extending its maturity to 2030 and maintaining $800 million in committed capacity, with an increased uncommitted accordion feature of $400 million. As of June 28, 2025, Valmont had no outstanding borrowings under this facility and a leverage ratio of 0.95, well within its covenant of 3.50 or lower.

The company's capital allocation strategy is balanced, aiming to deploy approximately 50% of operating cash flow towards high-return growth opportunities and 50% to shareholder returns. Valmont plans capital expenditures of $140 million to $160 million for fiscal 2025, with about two-thirds dedicated to growth initiatives, primarily in the Infrastructure segment. The Board increased the share repurchase program authorization by $700 million in February 2025, bringing the total to $2.1 billion, with $125.8 million in shares repurchased year-to-date through Q3 2025. Additionally, a 13% increase to the quarterly dividend was approved, with annual increases anticipated in line with long-term earnings growth.

Outlook and Risk Assessment

Valmont has raised its full-year adjusted diluted earnings per share expectation to a range of $18.70 to $19.50, with the midpoint at $19.10. Net sales are projected to be approximately $4.1 billion, the midpoint of the previous range of $4.0 billion to $4.2 billion. Management anticipates full-year EPS to land above the midpoint, inclusive of tariffs. The company expects to be cost-neutral with respect to tariffs in fiscal 2025, recovering the $3 million in Q1 costs in the remaining three quarters through pricing adjustments, supply chain reconfigurations, and increased use of U.S.-sourced steel. The long-term financial roadmap projects $500 million to $700 million in revenue growth and $7 to $12 in additional EPS over the next three to four years, with improvements expected to be smooth and not back-end loaded, starting in Q4 2025 and stepping up in 2026.

Despite the positive outlook, Valmont faces several risks. Macroeconomic and geopolitical uncertainties, including global economic volatility, inflationary pressures, supply chain disruptions, foreign currency fluctuations, and changing interest rates, can impact operational costs and revenue. The Agriculture segment remains cyclical, influenced by net farm income, commodity prices, and farmer sentiment. The weakening economic environment in Brazil, leading to tighter credit and delayed capital purchases, resulted in an $11 million bad debt expense in Q3 2025, and a legal proceeding related to a former dealer could adversely affect SG&A by up to an additional $20 million. Operational challenges in the L&T segment and policy uncertainty in the U.S. solar market also present ongoing concerns.

Conclusion

Valmont Industries stands as a compelling investment opportunity, strategically aligned with the undeniable megatrends shaping global infrastructure and agriculture. The company's disciplined approach to portfolio management, operational excellence, and technological innovation has forged a resilient business capable of delivering strong financial performance even amidst dynamic market conditions. Its leadership in engineered utility structures, coupled with significant capacity expansions, positions it to capture substantial growth from grid modernization and the burgeoning demands of electrification and data centers. In agriculture, Valmont's commitment to high-margin aftermarket solutions and advanced AgTech is cultivating a more stable and profitable segment, poised for recovery and long-term expansion.

With a robust balance sheet, consistent cash flow generation, and a clear capital allocation strategy focused on both growth investments and shareholder returns, Valmont is executing a well-defined roadmap for value creation. While macroeconomic headwinds and specific segment challenges persist, the company's proactive mitigation strategies, particularly around tariffs and cost optimization, underscore its operational agility. Valmont's deep engineering expertise, extensive global footprint, and trusted customer relationships provide a durable competitive advantage, ensuring its continued leadership and a promising trajectory for investors seeking exposure to critical infrastructure and sustainable agricultural solutions.