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Martin Marietta (MLM) Stock Rises Despite Q2 Earnings Miss

Zacks Equity Research

Martin Marietta Materials, Inc.’s MLM shares jumped 4% in the pre-market trading session, despite reporting lower-than-expected earnings in second-quarter 2019. The upside in share price mainly resulted from solid 2019 guidance. The company raised its full-year 2019 guidance on the back of strong performance in the first half of the year and attractive underlying housing market fundamentals.

Martin Marietta reported adjusted earnings per share of $3.01, missing the Zacks Consensus Estimate of $3.08 by 2.3%. However, the reported figure increased 3.1% from the year-ago level of $2.92 per share.

Total revenues (including Product and services and Freight revenues) in the quarter came in at $1,279.5 million, up 6.4% year over year. The upside was mainly attributable to a 10% increase in aggregates shipments and continued pricing momentum across the Building Materials business.

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

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

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

Segment Discussion

Building Materials segment (including aggregates, cement, ready-mixed concrete, asphalt and paving product lines) total revenues were $1,203.2 million, reflecting an increase of 6.5% year over year. The improvement was backed by strong demand, mostly in North Carolina, Georgia, Iowa and Maryland. However, Texas and Colorado — two largest states in terms of revenues — experienced extreme weather conditions that negatively impacted its aggregates, cement and downstream operations in these regions.

Within the segment, product and services revenues amounted to $1,125.8 million, up 6.1% from the year-ago level. Freight revenues of $77.5 million were also up 12.6% from the year-ago period.

Again, in the Product and services, Aggregates’ revenues of $757.8 million improved 13.6% from the year-ago quarter. However, Cement’s revenues fell 0.7% year over year to $112.4 million. Also, Ready Mixed Concrete’s revenues declined 13% year over year to $241.2 million. Nonetheless, revenues in Asphalt and paving product lines inched up 0.9% from the year-ago quarter to $82.2 million.

Geographically, Mid-America Group operations’ shipments grew 15.9% from the prior-year period, driven by infrastructure and commercial projects. Pricing in the said region also improved 1.6% from the prior-year quarter.

Southeast Group operations also reported an increase of 12.7% from the prior-year quarter, given strength in North Georgia and Florida markets. Moreover, West Groups’ aggregate shipments grew 1.1% from a year ago, despite unfavorable weather that contributed to project delays.

The Magnesia Specialties segment — including magnesium oxide, magnesium hydroxide and dolomite lime products — reported total revenues of $76.2 million, increasing 4.5% year over year. The upside was driven by solid global demand for magnesia chemical products.

Operating Highlights

Consolidated gross margin during the quarter was 27.9%, improving 160 basis points. Its earnings from operations increased 8.3% from the year-ago level to $285.9 million. Also, adjusted EBITDA of $378.5 million grew 0.6% year over year.

Liquidity and Cash Flow

As of Jun 30, 2019, Martin Marietta had cash and cash equivalents of $53.6 million compared with $44.9 million on Dec 31, 2018. Net cash provided by operations was $333.7 million at the end of second-quarter 2019 compared with $238 million in the comparable period of 2018.

2019 Guidance Raised

Backed by solid underlying demand and third-party forecasts, Martin Marietta raised its full-year 2019 guidance. The company believes that the current construction cycle will continue to expand during the year for each of the three primary construction end-use markets.

Total revenues in 2019 are expected in the band of $4.535-$4.730 billion compared with $4.480-$4.680 billion expected earlier. Gross profit is projected in the range of $1,130-$1,235 million (compared with prior-projection of $1,110-$1,210 million). The company expects EBITDA within $1.20-1.315 billion, up from $1.17-1.28 billion guided earlier. The company expects capital expenditure in the range of $350-$400 million.

Aggregates Product line total revenues are projected in the range of $2.865-$2.960 billion. This is above the prior expectation of $2.80-$2.91 billion. Aggregates volume growth is expected in the range of 8-10% versus 6-8% anticipated earlier. Average selling price is likely to grow 3-5% from a year ago.

Cement total revenues are estimated in the band of $435-$465 million (compared with $420-$450 projected earlier). Ready Mixed Concrete and Asphalt and Paving’s Products and services revenues are anticipated within $1.20-$1.40 billion (versus $1.24-$1.31 billion expected earlier). The company expects Magnesia Specialties Business’ net sales between $290 million and $300 million.

Within Aggregates, infrastructure shipments are likely to grow in high-single digits. Non-residential shipments are projected to increase in double digits. Residential shipments are expected to rise in mid-single digits. ChemRock/Rail shipments are likely to be marginally up from the prior-year figure.

Zacks Rank & Peer Releases

Martin Marietta currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Vulcan Materials Company’s VMC reported solid second-quarter 2019 results. The company reported adjusted earnings of $1.48 per share, surpassing the consensus mark of $1.45 by 2.1%. Total revenues of $1,327.7 million outpaced the consensus mark of $1,306 million by 1.7%. On a year-over-year basis, its earnings and revenues grew 20.4% and 10.6%, respectively, in the quarter

United Rentals URI reported better-than-expected second-quarter 2019 earnings and revenues. However, the company trimmed its full-year guidance to reflect "a slightly slower than expected pace for the BlueLine integration, as well as historically bad weather in several key regions this past quarter."

Masco Corporation MAS reported mixed second-quarter 2019 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Also, on a year-over-year basis, the company’s bottom line improved owing to significant pricing actions and cost-control measures. However, its top line slipped marginally from the prior-year quarter due to lower volumes across the board.

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