Martin Marietta Materials, Inc.

Estimates have been rising for Martin Marietta Materials, Inc. ( MLM - Snapshot Report ) after the company reported solid fourth quarter results on February 7.

It is a Zacks #2 Rank (Buy) stock.

Based on consensus estimates, analysts project 26% EPS growth this year and 40% growth next year. On top of this, the company pays a dividend that yields 1.8%.

Company Description

Martin Marietta Materials, Inc. is the second largest producer of construction aggregates in the United States and a producer of magnesia-based chemical and dolomitic lime.

The company derives the majority of its revenue from its Aggregates segment, which processes and sells granite, limestone, and other products from a network of 283 quarries, distribution facilities and plants to customers in North America. These products are primarily used by commercial customers in the domestic construction of highways and other infrastructure projects and for non-residential and residential building development.

It is headquartered in Raleigh, North Carolina and has a market cap of $4.0 billion.

Fourth Quarter Results

Martin reported solid fourth quarter results on February 7. Total revenue rose 8% year-over-year to $421.1 million, ahead of the Zacks Consensus Estimate of $378.0 million. A small decline in volumes was more than offset by higher prices.

Revenue was mixed by geography. Growth was strongest in the Mideast Group, which increased 11%. Sales in the West Group were up 7%, while the Southeast Group saw a 1% decline.

The gross profit margin declined 100 basis points from the same quarter in 2010 to 16.6% of total revenue. But this was more than offset by a decline in selling, general and administrative expenses as a percentage of revenue - from 8.7% to 7.5%.

Earnings per share came in at 39 cents, in-line with the Zacks Consensus Estimate.

Outlook

Despite Q4 EPS coming in-line, analysts revised their estimates higher significantly higher for both 2012 and 2013, sending the stock to a Zacks #2 Rank (Buy).

Based on consensus estimates, analysts expect strong double-digit EPS growth over the next two years. The Zacks Consensus Estimate for 2012 is $2.44, representing 26% EPS growth. And the 2013 consensus estimate is 40% higher at $3.42.

Analysts expect a modest recovery in the construction industry to drive increases in both pricing and volumes. This should lead to strong top and bottom line growth over the next two years.

Dividend

In addition to strong earnings growth, the company pays a dividend that yields a solid 1.8%. The company has paid the same 40 cent per share quarterly dividend since 2008.

Valuation

Shares of MLM have soared 17% year-to-date, leading to higher valuations. The stock now trades at 34.5x 12-month forward earnings, well ahead of its 10-year median of 18.5x, and a premium to the industry median of 28.5x.

But its price to book ratio of 2.8 is much more reasonable, and in-line with its historical median. Its price to cash flow ratio is also a reasonable 15.8.

The Bottom Line

With rising earnings estimates, strong growth projections, and a solid 1.8% dividend yield, Martin Marietta Materials offers plenty to like.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Co-Editor of the Reitmeister Value Investor.