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Martin Marietta's (MLM) Shares Down on Q4 Earnings Miss

Zacks Equity Research

Martin Marietta Materials, Inc. MLM reported fourth-quarter 2018 results, wherein adjusted earnings of $1.66 per share missed the Zacks Consensus Estimate of $1.71 by 2.9%. Also, the reported figure decreased 11.7% from the year-ago level of $1.88 per share. Shares of this leading supplier of building materials, including aggregates, cement, ready-mixed concrete and asphalt, company were down 2.7% at the time of writing.

Nevertheless, total revenues (including Products and services revenues as well as Freight revenues) of $1,020.2 million increased 5.1% year over year.

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

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

Segment Discussion

The Building Materials business includes aggregates, cement, ready-mixed concrete, asphalt and paving product lines.

The segment’s total revenues grew 5% from the prior-year quarter to $948.2 million. Product and services revenues amounted to $888.8 million compared with $849 million a year ago. Freight revenues totaled $59.4 million, up from $54 million in the year-earlier period.

Within the Product and services, Aggregates’ total revenues increased 12% from the year-ago quarter to $577.6 million. However, Ready Mixed Concrete total revenues declined 7.9% to $213.3 million from $231.6 million a year ago. Cement revenues also decreased to $87.3 million from $90.3 million in the year-ago quarter. Asphalt and paving product lines revenues fell 10% to $69.2 million from $76.9 million a year ago.

Heritage aggregates pricing improved 2.3%, while shipments declined marginally in the reported quarter. Meanwhile, after deducting the divested business shipments from the prior-year figure, the said metric increased 0.5% year over year.

Geographically, West Groups’ aggregate shipments decreased 1.2% from a year ago due to record October rainfall in Texas, as well as project delays in Colorado. The Southeast Group heritage operation also reported a 3.2% fall, given weather-related adversity in Georgia and Florida. However, after deducting prior year’s divested business impact, the said figure increased 1.9%.

Moreover, Mid-America Group heritage operations’ shipment grew 1.6% from the prior-year period owing to various large industrial projects in the Mideast Division, partially offset by delays in several large public and private construction projects in the Carolinas due to severe weather conditions.

The Magnesia Specialties segment, which includes magnesium oxide, magnesium hydroxide and dolomite lime products, reported total revenues of $72 million, up 6.7% year over year. The upside was driven by growth in both chemicals and lime businesses.

Operating Highlights

Consolidated gross margin contracted 440 basis points (bps) to 22.3%. Its adjusted earnings from operations declined 18.3% from the year-ago level to $159.5 million. Also, adjusted EBITDA of $267.7 million decreased 5.9% year over year.

Liquidity and Cash Flow

Martin Marietta's cash and cash equivalents as of Dec 31, 2018 were $44.9 million compared with $1,446.4 million recorded in the corresponding period of 2017. Net cash provided by operations came in at $705.1 million at the end of fourth-quarter 2018 compared with $657.6 million at the end of the third quarter.

2018 Highlights

For the full year of 2018, earnings per share of $7.43 (on a GAAP basis) declined 34% year over year. However, revenues increased 7% from the prior-year figure to $4.24 billion. Adjusted gross profit also increased 1.4% from the year-ago figure to $985.3 million.

2019 View

Total revenues in 2019 are expected in the band of $4.480-$4.680 billion. The company expects capital expenditure in the range of $350-$400 million. Gross profit is projected in the range of $1,110-$1,210 million. The company expects EBITDA within $1.17-1.28 billion.

Aggregates Product line total revenues are projected in the range of $2.80-$2.91 billion. Aggregates volume growth is expected in the range of 6-8%. Average selling price is likely to grow 3-5%.

Cement total revenues are estimated in the band of $420-$450 million. Ready Mixed Concrete and Asphalt and Paving’s total revenues are anticipated within $1.24-$1.31 billion.

The company expects Magnesia Specialties Business net sales between $290 million and $300 million.

Moreover, within Aggregates, Infrastructure shipments are likely to grow in high-single digits. Non-residential shipments are also projected to increase in mid-high single digits. Moreover, residential shipments are expected to rise in mid-single digits. ChemRock/Rail shipments are likely to be slightly up from the prior-year figure.

Zacks Rank

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.

Peer Releases

United Rentals URI reported earnings of $4.85 per share, surpassing the Zacks Consensus Estimate of $4.77 by 1.7%. Earnings also increased 45.2% from the year-ago level of $3.34. Total revenues (Homebuilding, Forestar and Financial Services) came in at $2.31 billion. The figure surpassed the Zacks Consensus Estimate of $2.21 billion and also increased 20% year over year.

Meritage Homes Corp. MTH reported earnings of $1.91 per share, surpassing the Zacks Consensus Estimate of $1.51 by 20.5%. Earnings also increased 120% from the year-ago level. Moreover, revenues in the Homebuilding segment increased 6.6% from the prior-year quarter to $1,008.8 million.

PulteGroup Inc. PHM reported fourth-quarter 2018 earnings of $1.11 per share, beating the consensus mark of $1.09 by 1.8%. The bottom line also improved 30.6% on a year-over-year basis. Total revenues of $2.99 billion surpassed the consensus mark of $2.93 billion and also increased 7.3% on a year-over-year basis.

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