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Martin Marietta (MLM) Beats on Q2 Earnings, Stock Increases

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Martin Marietta Materials, Inc. (MLM - Free Report) reported impressive second-quarter 2022 results. Earnings and revenues surpassed the Zacks Consensus Estimate and increased on a year-over-year basis, backed by improved pricing across businesses and higher demand.

Despite increased inflationary pressure from rising input costs and a challenging macroeconomic and geopolitical environment, solid execution of its strategic business plan and resilient aggregates-led business drove the result. Shares of this Raleigh, NC-based aggregate/cement producer moved up 0.74% in the pre-market trading session on Jul 28, following the earnings release.

Looking forward, Ward Nye, chairman and CEO of Martin Marietta, stated, “We expect to see a positive inflection in the current price/cost dynamic, as well as record second-half pricing growth rates which will facilitate attractive margin expansion and accelerated unit profitability growth going forward.”

He added, “Martin Marietta is well positioned to capitalize on strong demand trends across our coast-to-coast geographic footprint as increased infrastructure investment coupled with a recovery in light non-residential construction, large scale energy projects and domestic manufacturing is expected to insulate product shipments from any near-term, affordability-driven headwinds in residential end markets.”

Inside the Headlines

Martin Marietta delivered adjusted earnings per share from continuing operations of $3.96, beating the Zacks Consensus Estimate of $3.72 by 6.5% and increasing 3.9% from the year-ago quarter’s level of $3.81 per share.

Martin Marietta Materials, Inc. Price, Consensus and EPS Surprise


Martin Marietta Materials, Inc. Price, Consensus and EPS Surprise

Martin Marietta Materials, Inc. price-consensus-eps-surprise-chart | Martin Marietta Materials, Inc. Quote


Total quarterly revenues (including Product and Services and Freight revenues) came in at $1,641.7 million, up 19.1% from the year-ago period’s levels. Products and services revenues of $1.52 billion, contributing 92.8% to total revenues, increased 17.6% year over year and topped the consensus mark of $1.48 billion by 2.9%. The upside was driven by shipment growth, pricing gains and value-enhancing acquisitions.

Segment Discussion

Building Materials (including aggregates, cement, ready-mixed concrete, asphalt, paving product lines and Freight) reported revenues of $1,560 million, which increased 19.8% year over year. The upside was driven by robust pricing across all product lines and contributions from acquisitions. Within the segment, product and services revenues amounted to $1,449.2 million, up 18.3% from the year-ago quarter’s level. Freight revenues of $110.8 million were up from $76.8 million in the year-ago period.

Within the Building Materials’ product and services umbrella, Aggregates’ revenues of $955.2 million rose 19.1 from the year-ago quarter’s levels. Cement revenues rose 35.5% year over year to $157.9 million. Ready Mixed Concrete’s revenues decreased 15.8% year over year to $226.1 million. Revenues in Asphalt and Paving product lines also increased 56.9% from the year-ago quarter’s levels to $212.3 million.

Aggregates shipments rose 9.3% year over year (up 1.8% organically) and pricing advanced 8.4% (up 8.8% organically). The upside was driven by public and private product demand at the onset of the construction season.

Geographically, East Group shipments fell 1% from the prior year’s tally, due to unfavorable weather in April and rail and marine shipping challenges. Pricing increased 7.6%. West Groups’ aggregate shipments surged 30% from a year ago. Organic pricing in the region grew 11.7% year over year (up 8.3% on a mix-basis).

Cement shipments advanced 19.8% year over year. Pricing improved 14.7% year over year (up 12.5% on a mix-basis). The upside was driven by continued strong demand and tight cement supply in Texas.

Within the Downstream business, ready mixed concrete shipments and pricing rose 3.4% and 17.4% organically from the prior-year quarter, owing to strong demand in Dallas/Fort Worth, Austin and San Antonio.

Asphalt shipments and pricing jumped 40.2% and 24% organically (including contributions from the acquired West Coast operation), respectively.

Magnesia Specialties reported product revenues of $74.6 million, up 6.6% year over year, driven by continued strong demand for magnesia-based chemical products.

Operating Highlights

Gross margin came in at 25.9%, which decreased from 27.9% a year ago. Adjusted EBITDA of $478.3 million increased 8.9% year over year.

Liquidity and Cash Flow

As of Jun 30, 2022, Martin Marietta had cash and cash equivalents of $772.1 million compared with $258.4 million at the 2021-end. Long-term debt (excluding current maturities) was $5,044.3 million, up slightly from $5,100.8 million at the 2021-end.

Net cash provided by operations was $286.2 million for the quarter, down from $441.2 million in the year-ago period. It had $1.2 billion unused borrowing capacity on the existing credit facility at Jun-end.

2022 Guidance

Martin Marietta updated its guidance for the current year, considering second-half pricing cadence, ongoing inflationary pressure and volume constraints driven by continued supply chain and logistics challenges.

The company expects products and services revenues in the range of $5,770-$5,910 million (compared with $5,640-$5,820 million expected earlier), gross profit in the $1,500-$1,585 million band (earlier expected in the $1,560-$1,665 million range), selling, general and administrative expenses within $390-$400 million (versus $395-$405 million expected earlier) as well as adjusted EBITDA between $1,670 million and $1,750 million (versus $1,700-$1,800 million expected earlier).

Interest expenses are likely to be within the $160-165 million range and the tax rate is projected in the range of 21-22%. Net earnings are anticipated in the $780-$870 million range versus the earlier projection of $800-$900 million. Capital expenditures are anticipated in the $525-550 million range.

Total aggregate shipment growth is now expected in the range of 5.5-8% versus the prior projection of 7-10%. Organically, it is likely to be 0-2.5%, down from prior anticipation of 1-4%. Aggregates products and services revenues are expected in the $3,565-$3,640 million range. Total aggregate pricing is expected to grow between 10% and 12% (9% and 11% expected earlier).

Cement, Ready Mixed Concrete and Asphalt and Paving, and Magnesia Specialties Businesses’ products and services revenues are expected in the $610-$630 million, $1,705-$1,750 million and $285-295 million range, respectively.

Zacks Rank

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.

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