Weak results have led to sharp downward estimates revisions, sending this construction materials company to a Zacks Rank # 5 (Strong Sell).
About the Company
Headquartered in Raleigh, North Carolina, Martin Marietta Materials (MLM - Analyst Report) is the country’s second largest producer of construction aggregates, used primarily for construction of roads, highways and other infrastructure projects and in the domestic commercial and residential construction industries.
The company operates through approximately 300 quarries, distribution yards and plants located in 28 states, Canada, the Bahamas and the Caribbean Islands.
MLM reported its second quarter FY 2013 results on July 30, 2013. Diluted EPS for the quarter came in at $0.88 per share, down substantially from the Zacks Consensus Estimate of $1.11 per share. The company said that the results were affected by excessive rainfall in most of their key markets-- particularly in the midwestern and southeastern states.
According to company estimates that the precipitation reduced shipment volumes between 1.5 million and 1.7 million tons, lowering net earnings by up to $0.11 per diluted share in addition to significantly affecting the operational productivity.
For the full-year, the company anticipates aggregates product line shipments to increase by 1% to 3%.
Due to disappointing results and uninspiring guidance, quarterly and annual estimates have been revised sharply downwards in the past few weeks. Zacks consensus estimates for the current quarter and year are now $1.47 and $2.55 per share respectively, down substantially from $1.60 and $2.92 per share, 30 days ago.
The company has missed estimates in three of the past four quarters, with an average negative surprise of 23.9%.
The Bottom Line
MLM is currently Zacks Rank # 5 (Strong Sell) stock and it has a longer-term recommendation of “Underperform”. Further, uninspiring guidance from the management regarding the volumes has resulted in weak outlook for the stock for the time being.
Investors seeking exposure to Construction industry could look at some of the homebuilders instead of construction materials suppliers. Among the Homebuilders—Meritage Homes (MTH) beat the Zacks Consensus Estimate for both revenues and earnings. This Zacks Rank# 2 (Buy) stock saw increasing demand and pricing in most housing markets during the recent quarter.
However, we may add that rising mortgage rates seem to have started impacting the housing market and as a result, estimates for homebuilders may come down slightly if the trend continues.
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