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Martin Marietta's Buyout Plans Bode Well, Weather Woes Stay
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On May 30, we issued an updated research report on Martin Marietta Materials, Inc. (MLM - Free Report) – producer and supplier of construction aggregates and other heavy building materials.
We are encouraged by the company’s string of acquisitions and attractive shareholder returns. Also, an uptick in private and public construction activity boosts demand for both the company’s aggregates as well as cement business. However, adverse weather conditions act as a dampener.
Notably, shares of Martin Marietta have outperformed the Zacks categorized Building Cement Concrete and Aggregates industry in the last one year. While the industry saw growth of 17%, Martin Marietta’s shares have rallied 20.5% over the same time frame. Meanwhile, estimates for the current year and the next have moved up by 0.5% and 1.9% over the last 30 days.
Key Positives
The company has completed over 85 small acquisitions since its Initial Public Offering in 1994. These buyouts have strengthened its position in the Aggregates business. In 2016, the company invested $179 million in acquisitions. Acquisitions contributed $27 million to first-quarter 2016 net sales growth as well as margins.
The steady improvement in private construction activity bodes well, as it increases demand for both the aggregates as well as cement businesses of the company. Volumes in the residential market increased 27% in the first quarter of 2017, driven by continued strength in housing. Government initiatives toward financing infrastructure projects are expected to grow in the near term, thereby providing a further boost to demand for Martin Marietta.
Notably, the non-residential market is expected to increase in a low to mid-single digit range and residential market is expected to grow in the mid to high single-digit range in 2017.
Concerns
Abnormally wet weather conditions in many markets are affecting Martin Marietta. All of the company’s businesses are subjected to weather-related risks that can significantly affect production schedules and profitability. The first and fourth quarters are most adversely affected by winter. Hurricane activity in the Atlantic Ocean and Gulf Coast is most active during the third and fourth quarters.
Again, Martin Marietta’s valuation looks a little stretched when compared to the industry average. Looking at the company’s price-to-earnings (P/E) ratio, the company currently has a trailing 12-month P/E ratio of 34.46, higher than the S&P 500 average which stands at 20.19 over the past five years. Also, the stock is relatively overvalued right now, compared to its peers, as the Building Cement Concrete and Aggregates industry’s average over the past five years stands at 25.71.
Zacks Rank & Stocks to Consider
Martin Marietta sports a Zacks Rank #3 (Hold).
Better-ranked stocks in the sector include Lyon William Homes , M/I Homes, Inc. (MHO - Free Report) and KB Home (KBH - Free Report) .
Lyon William and M/I Homes sport a Zacks Rank #1 (Strong Buy). Full-year 2017 earnings for Lyon William are expected to increase 38.4%, while that of M/I Homes is likely to rise 36.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.
KB Home, a Zacks Rank #2 (Buy) stock, is expected to witness 43.3% growth in fiscal 2017 earnings.
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Martin Marietta's Buyout Plans Bode Well, Weather Woes Stay
On May 30, we issued an updated research report on Martin Marietta Materials, Inc. (MLM - Free Report) – producer and supplier of construction aggregates and other heavy building materials.
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We are encouraged by the company’s string of acquisitions and attractive shareholder returns. Also, an uptick in private and public construction activity boosts demand for both the company’s aggregates as well as cement business. However, adverse weather conditions act as a dampener.
Notably, shares of Martin Marietta have outperformed the Zacks categorized Building Cement Concrete and Aggregates industry in the last one year. While the industry saw growth of 17%, Martin Marietta’s shares have rallied 20.5% over the same time frame. Meanwhile, estimates for the current year and the next have moved up by 0.5% and 1.9% over the last 30 days.
Key Positives
The company has completed over 85 small acquisitions since its Initial Public Offering in 1994. These buyouts have strengthened its position in the Aggregates business. In 2016, the company invested $179 million in acquisitions. Acquisitions contributed $27 million to first-quarter 2016 net sales growth as well as margins.
The steady improvement in private construction activity bodes well, as it increases demand for both the aggregates as well as cement businesses of the company. Volumes in the residential market increased 27% in the first quarter of 2017, driven by continued strength in housing. Government initiatives toward financing infrastructure projects are expected to grow in the near term, thereby providing a further boost to demand for Martin Marietta.
Notably, the non-residential market is expected to increase in a low to mid-single digit range and residential market is expected to grow in the mid to high single-digit range in 2017.
Concerns
Abnormally wet weather conditions in many markets are affecting Martin Marietta. All of the company’s businesses are subjected to weather-related risks that can significantly affect production schedules and profitability. The first and fourth quarters are most adversely affected by winter. Hurricane activity in the Atlantic Ocean and Gulf Coast is most active during the third and fourth quarters.
Again, Martin Marietta’s valuation looks a little stretched when compared to the industry average. Looking at the company’s price-to-earnings (P/E) ratio, the company currently has a trailing 12-month P/E ratio of 34.46, higher than the S&P 500 average which stands at 20.19 over the past five years. Also, the stock is relatively overvalued right now, compared to its peers, as the Building Cement Concrete and Aggregates industry’s average over the past five years stands at 25.71.
Zacks Rank & Stocks to Consider
Martin Marietta sports a Zacks Rank #3 (Hold).
Better-ranked stocks in the sector include Lyon William Homes , M/I Homes, Inc. (MHO - Free Report) and KB Home (KBH - Free Report) .
Lyon William and M/I Homes sport a Zacks Rank #1 (Strong Buy). Full-year 2017 earnings for Lyon William are expected to increase 38.4%, while that of M/I Homes is likely to rise 36.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.
KB Home, a Zacks Rank #2 (Buy) stock, is expected to witness 43.3% growth in fiscal 2017 earnings.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>