A month has gone by since the last earnings report for Martin Marietta (MLM). Shares have added about 1.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Martin Marietta due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Martin Marietta (MLM) Q2 Earnings Miss, 2019 View Up
Martin Marietta Materials, Inc. reported lower-than-expected earnings in second-quarter 2019. That said, 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.
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.
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). It 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.
How Have Estimates Been Moving Since Then?
Estimates revision followed an upward path over the past two months.
At this time, Martin Marietta has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
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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