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Martin Marietta (MLM) Stock Gains on Strong Q2 & Dividend Hike

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Martin Marietta Materials, Inc.’s (MLM - Free Report) stock has been regaining strength on impressive second-quarter earnings and revenue performances and regular dividend hikes. The stock gained 14.4% in the past three months, outperforming the Zacks Building Products - Concrete and Aggregates industry's 11.9% rally.

Recently, the company posted second-quarter results, wherein both the top and bottom lines surpassed the Zacks Consensus Estimate and increased year over year on improved pricing across businesses and higher demand. Also, the solid execution of its strategic business plan and resilient aggregates-led business drove results.

Given the solid performance, MLM’s chairman and CEO expects to see a positive inflection in the current price/cost dynamic and record pricing growth rates, which will facilitate attractive margin expansion and accelerate unit profitability growth in the second half. (See more: Martin Marietta Beats on Q2 Earnings, Stock Increases)

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On Aug 10, the company announced an 8% hike in its quarterly cash dividend to reward shareholders regularly. Martin Marietta raised the dividend payout to 66 cents per share (or $2.64 annually) from 61 cents (or $2.44 annually). The amount will be paid on Sep 30, 2022 to shareholders of record as of Sep 1.

This move highlights the company’s sound and stable financial position. The company has been driving shareholder value through regular dividend payouts, share repurchase programs, reinvesting in the business and selectively pursuing acquisitions with the right fit and return. For the first six months of 2022, the company paid $77 million through dividend payouts and $50 million via share repurchases.

Investors always prefer a return-generating stock. Hence, a high-dividend-yielding one is much coveted. It goes without saying that stockholders are always on the lookout for companies with a track record of consistent and incremental dividend payouts.

This Zacks Rank #3 (Hold) company has been benefiting from higher shipments, improved pricing strategy and prudent cost management. Also, increased infrastructure funding, strong housing activity and recovering private non-residential markets are helping the company to drive growth. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings estimates for the current year are currently pegged at $13.28 per share, suggesting 8.1% year-over-year growth. The positive trend signifies bullish analyst sentiment, indicating robust fundamentals and the expectation of outperformance in the near term.

However, supply-chain disruptions and cost inflation, particularly for labor and diesel, are concerning for the major industry players like MLM, Summit Materials, Inc. (SUM - Free Report) , Vulcan Materials Company (VMC - Free Report) and Eagle Materials Inc. (EXP - Free Report) . Martin Marietta uses a large amount of electricity, diesel fuel, liquid asphalt and other petroleum-based resources, subject to potential supply constraints and significant price fluctuations.

Apart from this, Martin Marietta is susceptible to bad weather conditions, including hurricanes, tornadoes and other weather events, as most of its products are used outdoors in the public or private construction industry. Inclement weather affects both the company’s ability to produce and distribute products as well as demand as construction work can be hampered by weather.

That said, the solid prospects of the Aggregates business and Strategic Operating Analysis and the Review (SOAR) 2025 plan are likely to somewhat offset these challenges.

A Brief Overview of Above-Mentioned Stocks

Summit Materials: The construction material company is based in Denver, CO. Migration activity amid the pandemic continues to favor rural and exurban markets. Additionally, the strong execution of its Elevate Summit strategy and higher average selling prices for aggregates have been aiding the company to drive growth. SUM remains focused on sustainable improvement via investments in green fields and end markets that are underpinned by sturdy growth fundamentals.

Estimates for Summit Materials’ 2022 earnings indicate year-over-year growth of 22.3%.

Vulcan: The construction aggregates company’s focus on four strategic initiatives — Commercial Excellence, Operational Excellence, Strategic Sourcing and Logistics Innovation — will enhance the price performance and operating efficiencies. Vulcan has been generating higher earnings despite tepid revenues due to prudent cost-control efforts and increased pricing in aggregates. Its focus on a systematic inorganic strategy for expansion is adding to the positives.

Estimates for Vulcan’s 2022 earnings suggest year-over-year growth of 11.7%.

Eagle Materials: This Dallas, TX-based company is benefiting from the improved cement, concrete and aggregates sales volume as well as the solid contribution from the recently acquired Kosmos Cement business. Higher pricing is adding to the positives.

Earnings estimates for fiscal 2023 suggest 22.2% year-over-year growth.