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Martin Marietta (MLM) Buys Lehigh West Region, Fortifies SOAR

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In a bid to strengthen its geographic footprint, Martin Marietta Materials, Inc. (MLM - Free Report) recently completed the buyout of Lehigh Hanson, Inc.’s West Region business (“Lehigh West Region”) for $2.3 billion in cash.

Ward Nye, Chairman, president and CEO of Martin Marietta, said, “We are confident in our ability to quickly realize the benefits of this transaction and deliver significant value creation for our shareholders, customers and employees following the same proven approach we took with our acquisitions of TXI and Bluegrass.”

Solid Acquisition Strategy

Martin Marietta has been acquiring businesses to expand its footprint and drive growth. In the previous month, this construction aggregates supplier inked a deal with Spanish conglomerate Ferrovial to acquire the latter’s U.S.-based unit Southern Crushed Concrete for $140 million, per Reuters. (Read more: Martin Marietta to Acquire Ferrovial's SCC for $140M)

On Apr 30, the company acquired Minnesota-based Tiller Corporation (“Tiller”), which will be integrated into the Central Division. Tiller is the leading aggregates and FOB hot mix asphalt supplier in the Minneapolis/St. Paul region.

Its priorities are focusing on value-enhancing acquisitions, prudent organic capital investment and consistent return of capital to shareholders while maintaining an investment-grade rating profile.

Shares of Martin Marietta have advanced 1.4% over the past three months compared with the Zacks Building Products - Concrete and Aggregates industry’s 3.1% growth.

That said, higher diesel and raw material costs along with adverse weather raise concerns. Earnings estimates for 2021 have moved 1.5% downward over the past 30 days. This depicts analysts’ concern over the company’s prospects. We believe that the recent move, and improved pricing as well as disciplined cost management throughout the business will help it mitigate these risks.

Zacks Rank & Key Picks

Martin Marietta currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the Zacks Construction sector include KBR, Inc. (KBR - Free Report) , Altair Engineering Inc. (ALTR - Free Report) and AECOM (ACM - Free Report) , each carrying a Zacks Rank #2 (Buy).

KBR, Altair, and AECOM are expected to witness an earnings growth rate of 24.9%, 64.5%, and 31.2%, respectively, in the current year.

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