Martin Marietta (MLM) Down 10.2% Since Last Earnings Report: Can It Rebound?

·6 min read

It has been about a month since the last earnings report for Martin Marietta (MLM). Shares have lost about 10.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Martin Marietta due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Martin Marietta Tops on Q4 Earnings, Misses on Revenues

Martin Marietta Materials, Inc.  mixed results for fourth-quarter 2022. Earnings beat the Zacks Consensus Estimate but revenues (products and services) missed the same. On a year-over-year basis, the metrics declined due to inclement weather in a number of key markets and higher operating costs.

Pertaining to 2022 results, Ward Nye, chairman and CEO of MLM, stated, “2022 marked our Company’s eleventh consecutive year delivering increased products and services revenues, gross profit and Adjusted EBITDA, as well as our most profitable year ever. We achieved record financial results and world-class safety incidence rates while also seamlessly integrating a large platform acquisition and completing non-core asset divestitures against a backdrop of rapid monetary tightening, a resulting housing slowdown and cost inflation at 40-year highs.”

Nye added, “Entering 2023, near-term product demand visibility is supported by healthy customer backlogs driven by an acceleration in public infrastructure investment and announced large-scale energy and domestic manufacturing projects.”

He further stated, “In total, we expect full year 2023 aggregates shipments to be relatively flat but, given the carryover effects of our 2022 commercial actions and broad acceptance of our January 1, 2023 price increases, we are confident in our ability to continue to deliver accelerated margin expansion.”

Inside the Headlines

Martin Marietta reported adjusted earnings from continuing operations of $3.04 per share, which beat the Zacks Consensus Estimate of $3.02 by 0.7% but decreased 3.5% from the year-ago quarter’s $3.15 per share. The downside was due to colder temperatures, higher precipitation across most of the company’s geographies and higher operating costs.
 
Total quarterly revenues (including Product and Services and Freight revenues) were $1.48 billion, down 1.3% from the year-ago period. Products and services revenues of $1.38 billion, contributing 93.4% to total revenues, decreased 1.9% year over year and missed the consensus mark of $1.43 billion. Higher pricing gains and value-enhancing acquisitions were offset by lower shipments due to unfavorable weather.

Segmental Discussion

Building Materials (including aggregates, cement, ready-mixed concrete, asphalt, paving product lines and Freight) reported revenues of $1,406.9 million, which decreased 1.1% year over year. Within the segment, product and service revenues amounted to $1,314.9 million, down from the year-ago quarter’s $1,337.3 million. Freight revenues of $92 million were up from $85.5 million in the year-ago period.

Within the Building Materials’ product and services umbrella, Aggregates revenues rose to $849.2 million from the year-ago quarter’s $827 million. Cement revenues rose 7.9% year over year to $146.9 million. Ready Mixed Concrete’s revenues decreased 35.4% year over year to $207.7 million. Revenues in Asphalt and Paving product lines increased 16.3% from the year-ago quarter’s levels to $198.6 million.

Aggregates shipments were down 12% year over year and pricing advanced 16.5% (up 13.8% on a mix-adjusted basis). Inclement weather in certain key markets led to a decrease in shipments.

Cement shipments declined 10.8% year over year due to wet and cold weather in Texas. Pricing increased 20.8% year over year.

Within the Downstream business, ready mixed concrete shipments declined 46.4%, with pricing growth of 19.6% from the prior-year quarter.

Total Asphalt shipments declined 8.7% but pricing jumped 21.4%.

Magnesia Specialties reported product and services of $63.5 million (down 6.1% year over year) and freight revenues of $6.1 million (up from $6 million a year ago) due to lower demand for chemical and lime products.

Operating Highlights

Adjusted gross profit decreased 2% year over year. The adjusted gross margin was 28.2%, which expanded 30 basis points from a year ago. Adjusted EBITDA of $391.7 million decreased from $393.7 million a year ago.

2022 Highlights

Adjusted earnings declined to $12.07 per share from $12.28 per share in 2021. Total revenues were $6,160.7 million, up from $5,414 million in 2021. Adjusted EBITDA was $1,600.3 million, up from $1,528.5 million in 2021.

Liquidity and Cash Flow

As of Dec 31, 2022, Martin Marietta had cash and cash equivalents and restricted cash of $358.8 million compared with $258.9 million at 2021-end. Also, it had $1.20 billion of unused borrowing capacity on its existing credit facilities at 2022-end. Long-term debt (excluding current maturities) was $4,340.9 million, down from $5,100.8 million at the 2021-end. Net cash provided by operations was $991.2 million in 2022, down from $1,137.7 million in the year-ago period.

2023 Guidance

Martin Marietta expects consolidated products and services revenues of $6,180-$6,370 million, as well as adjusted EBITDA between $1,800 million and $1,900 million.

Interest expenses are likely to be $165-170 million and the tax rate is projected to be 21-22%. Net earnings from continuing operations attributable to Martin Marietta are anticipated to be $880-$990 million. Capital expenditure is anticipated to be $575-625 million.

Within the Building Materials business, total aggregate shipment growth is expected between down 2% and up 2%. Total aggregate pricing per ton is expected to grow between 13% and 15%. Gross profit is likely to be $1,225-$1,295 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

The consensus estimate has shifted 13.19% due to these changes.

VGM Scores

Currently, Martin Marietta has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Martin Marietta has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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