Martin Marietta Materials, Inc. MLM inked a deal with Smyrna Ready Mix Concrete LLC to sell Colorado and Central Texas-based ready mixed concrete operations. The deal is likely to close on Mar 31, 2022, subject to certain regulatory approvals and other customary closing conditions. The transaction is in line with MLM’s Strategic Operating Analysis and Review (SOAR) 2025 plan.
Post the news release, MLM stock moved up 0.16% on Mar 24.
Ward Nye, the chairman, president and CEO of Martin Marietta, said, “Proceeds from this divestiture will be used to advance our longstanding capital allocation priorities, which are focused on value-enhancing acquisitions, prudent organic investments, and returning cash to shareholders through both a meaningful and sustainable dividend and our share repurchase program.”
Inorganic Moves Bode Well
Martin Marietta is banking on long-term strategic plans, commonly known as SOAR. MLM’s SOAR 2025 plan includes the ongoing evaluation of aggregates-led opportunities of scale in new domestic markets, expansion through acquisitions that complement the existing operations and divestiture of assets that are not consistent with the stated goals. On that note, the company spent $3.1 billion in acquisitions in 2021.
On Mar 1, the company inked a deal with CalPortland Company to sell certain California-based West Coast cement and ready mixed concrete operations for $250 million in cash. The operations include the Redding cement plant, related cement distribution terminals and 14 ready-mixed concrete plants
On Oct 1, 2021, Martin Marietta completed its largest acquisition of Lehigh Hanson, Inc.’s West Region business for $2.3 billion in cash, thereby propelling growth in California and Arizona.
Image Source: Zacks Investment Research
Shares of this Zacks Rank #3 (Hold) company have gained 7.5% in the past six months versus the Zacks Building Products - Concrete and Aggregates industry’s 0.3% fall. The company’s priorities are centered on value-enhancing acquisitions, prudent organic capital investment and consistent return of capital to shareholders while maintaining an investment-grade rating profile.
That said, higher diesel and raw material costs along with adverse weather raise concerns for MLM and other industry players like Vulcan Materials Company VMC, Summit Materials, Inc. SUM and Cornerstone Building Brands, Inc. CNR.
We believe that the recent move and improved pricing as well as disciplined cost management throughout the business will help it mitigate these risks.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A Brief Overview of the Above-Mentioned Stocks
Vulcan Materials: produces and supplies construction aggregates, asphalt mix as well as ready-mixed concrete. The company’s focus on four strategic initiatives — Commercial Excellence, Operational Excellence, Strategic Sourcing, and Logistics Innovation — will enhance price performance and operating efficiencies. Vulcan Materials is generating higher earnings despite tepid revenues on the back of prudent cost-control efforts and increased pricing in aggregates. Its focus on a systematic inorganic strategy for expansion is adding to the positives.
VMC’s 2022 earnings are expected to increase 26%.
Summit Materials: This is a construction material company based in Denver, CO. Migration activity amid the pandemic continues to favor rural and exurban markets. Additionally, the strong execution of its Elevate Summit strategy and higher average selling prices for aggregates have been aiding the company to drive growth. It is focused on sustainable improvement via investments in greenfields and end markets that are underpinned by sturdy growth fundamentals.
Summit Materials’ earnings estimates for 2022 are expected to grow 38.4%.
Cornerstone Building Brands: This Cary, NC-based company is a manufacturer of exterior building products, mainly in North America. It is gaining traction, courtesy of higher volume leverage on robust demand for residential products and benefits from cost-reduction initiatives. Although Cornerstone Building Brands is experiencing supply chain disruptions, strong residential end markets have been helping it navigate through the situation. The company’s strong operational execution is positioning Cornerstone Building Brands for long-term profitable growth.
Cornerstone Building’s 2022 earnings are expected to increase 30%.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Vulcan Materials Company (VMC) : Free Stock Analysis Report
Martin Marietta Materials, Inc. (MLM) : Free Stock Analysis Report
Summit Materials, Inc. (SUM) : Free Stock Analysis Report
Cornerstone Building Brands, Inc. (CNR) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research