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Martin Marietta (MLM) to Post Q2 Earnings: What's in Store?

Zacks Equity Research

Martin Marietta Materials, Inc. MLM is scheduled to report second-quarter 2020 results on Jul 28, before the opening bell.

In the last reported quarter, the company’s earnings and revenues missed the Zacks Consensus Estimate by 26.8% and 0.2%, respectively. On a year-over-year basis, earnings of this aggregates producer declined 39.7% but revenues grew 2%. The earnings decline was due to the impact of lower unit production costs on aggregates inventory standards and the prior-year benefit from a change in tax election for a subsidiary. Meanwhile, higher shipments and pricing across the Building Materials business benefited the top line in the quarter.

Trend in Estimate Revision

The Zacks Consensus Estimate for second-quarter earnings is pegged at $3.04 per share, which suggests a 1% increase from $3.01 reported in the year-ago period. Notably, earnings estimates for the quarter have increased 2% over the past seven days. However, the consensus mark for revenues is pegged at $1.15 billion, which calls for a 4% decrease from the prior-year reported figure.

Let’s discuss the factors that are likely to reflect on the upcoming quarterly results.

Martin Marietta Materials, Inc. Price and EPS Surprise

Martin Marietta Materials, Inc. Price and EPS Surprise
Martin Marietta Materials, Inc. Price and EPS Surprise

Martin Marietta Materials, Inc. price-eps-surprise | Martin Marietta Materials, Inc. Quote

Factors to Note

Martin Marietta is expected to have generated year-over-year earnings growth in the second quarter unlike the first quarter. Building material producers are expected to have benefited from negligible project cancellations amid the COVID-19 pandemic as most construction was deemed essential during state directed shutdowns.

Martin Marietta’s business and earnings are sensitive to changes in construction spending, particularly housing and public construction in Texas, Colorado, North Carolina, Georgia, Florida, and Iowa.

The company is expected to have experienced modest but transitory headwinds in road maintaining spending in first-half 2020 as North Carolina DOT works through some temporary cash flow issues. Notably, North Carolina is Martin Marietta’s third-largest state in terms of revenues. Wet weather in some parts of its geographies may get reflected in the quarterly results.

Nonetheless, large energy sector projects along the Texas and Gulf Coast are expected to have boosted demand for heavy building materials, as well as helped Martin Marietta in sales generation. Again, healthy commercial construction activities like growth in distribution centers, warehouses, data centers and wind turbine projects in the non-residential market (which represented 36% of 2019 aggregate shipments) are expected to have aided the company’s second-quarter performance. This is due to the fact that businesses increase e-commerce activity, secure regional supply chains, and become more reliant on cloud and network services.

Solid residential construction (which accounted for 22% of 2019 aggregate shipments) in most part of the second quarter is expected to have contributed to its top line.

Other Projections

The Zacks Consensus Estimate for Building Material segment (product and services) — which accounted for 86.7% of first-quarter total revenues — is pegged at $1,210 million, implying a 0.6% improvement from a year ago and 45.6% increase from first-quarter 2020.

The consensus estimate for Magnesia Specialties revenues (product and services) is currently pegged at $45.7 million. This suggests a 23.8% sequential decrease.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Martin Marietta this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Earnings ESP: Martin Marietta has an Earnings ESP of +0.78%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: It currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks Worth a Look

Here are some other companies in the Zacks Construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.

TopBuild Corp. BLD has an Earnings ESP of +29.11% and holds a Zacks Rank #1.

Foundation Building Materials, Inc. FBM has an Earnings ESP of +28.57% and carries a Zacks Rank #3.

KBR, Inc. KBR has an Earnings ESP of +11.11% and carries a Zacks Rank #3.

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