It has been about a month since the last earnings report for Martin Marietta (MLM Quick QuoteMLM - Free Report) . Shares have added about 10.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Martin Marietta due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Martin Marietta (MLM Quick QuoteMLM - Free Report) Lags on Q3 Earnings, Lowers 2022 Guidance

Martin Marietta Materials, Inc. reported mixed results for third-quarter 2022. Earnings missed the Zacks Consensus Estimate, but revenues surpassed the same. On a year-over-year basis, the metrics improved backed by double-digit pricing growth on relatively flat organic aggregates shipments.

Pertaining to fourth quarter views, Ward Nye, chairman and CEO of MLM, stated, “Importantly, we expect a return to expanding margins in the fourth quarter as the compounding effect of multiple pricing actions throughout the year offsets continued inflationary pressure and a slowdown in single-family residential construction.”

Nye added, “Near-term, we expect affordability driven headwinds in the single-family residential end market will be offset by a significant acceleration in public infrastructure investment and continued strength in large-scale energy, domestic manufacturing and multi-family residential projects.”

On Aug 9, the company entered into a contract to sell the Tehachapi, CA cement plant and related distribution terminals to CalPortland for $350 million in cash. The transaction is subject to customary regulatory approvals and closing conditions.

Inside the Headlines

Martin Marietta reported adjusted earnings from continuing operations of $4.69 per share, which missed the Zacks Consensus Estimate of $4.74 by 1.1% but increased 10.4% from the year-ago quarter’s level of $4.25 per share.

Total quarterly revenues (including Product and Services and Freight revenues) came in at $1.81 billion, up 16.3% from the year-ago period’s levels. Products and services revenues of $1.68 billion, contributing 92.8% to total revenues, increased 14.9% year over year and topped the consensus mark of $1.67 billion by 0.6%. The upside was driven by 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 $1,736 million, which increased 17.4% year over year. The upside was driven by double-digit pricing growth across all product lines and contributions from acquisitions. Within the segment, product and services revenues amounted to $1,611.5 million, up 15.9% from the year-ago quarter’s level. Freight revenues of $124.5 million were up from $88.1 million in the year-ago period.

Within the Building Materials’ product and services umbrella, Aggregates revenues rose 18.5% of $1,015.7 million from the year-ago quarter’s levels. Cement revenues rose 23.4% year over year to $163.2 million. Ready Mixed Concrete’s revenues decreased 29.1% year over year to $227.4 million. Revenues in Asphalt and Paving product lines increased 58.1% from the year-ago quarter’s levels to $309.8 million.

Aggregates shipments rose 5.6% year over year (down 0.1% organically) and pricing advanced 11.6% (up 11.9% organically). Acquisition benefits were offset by logistical constraints, cement shortages and inclement weather in certain key markets.

Geographically, East Group shipments were flat year over year due to unfavorable weather and supply chain challenges. Pricing increased 11.5% (up 10.3% on a mix-adjusted basis). West Groups’ aggregate shipments surged 15.6% from a year ago, driven by contributions from acquired operations and strong Texas demand, partially offset by a historically wet August in North Texas. Organic pricing in the region grew 12.4% year over year (up 13.2% on a mix-adjusted basis).

Cement shipments advanced 2.3% year over year. Pricing increased 21.4% year over year (up 20.6% on a mix-basis). The upside was driven by continued strong demand and multiple price increases.

Within the Downstream business, ready mixed concrete shipments declined 37.6%, with pricing growth of 13.6% from the prior-year quarter. Organically, shipments were down 16.8% due to record rainfall in portions of Texas during August and the completion of certain large projects. Yet, pricing grew 20.3% due to the positive impact of multiple price increases implemented during the year.

Asphalt shipments and pricing jumped 31.3% and 26.1%, respectively. On an organic basis, total asphalt shipments and pricing increased 4.3% and 22%, respectively.

Magnesia Specialties reported product and services of $69 million and freight revenues of $6.7 million, down 4% year over year, due to lower demand from domestic steel industry customers for dolomitic lime products.

Operating Highlights

Adjusted gross profit increased 8.4% year over year. Adjusted gross margin came in at 26.9%, which decreased from 28.9% posted a year ago. Adjusted EBITDA of $533.1 million increased 8.8% year over year.

Liquidity and Cash Flow

As of Sep 30, 2022, Martin Marietta had cash and cash equivalents of $135.7 million compared with $258.4 million at the 2021-end. Also, it had nearly $1.20 billion of unused borrowing capacity on its existing credit facilities at the third quarter end. Long-term debt (excluding current maturities) was $4,339.9 million, down from $5,100.8 million at the 2021-end.

Net cash provided by operations was $560.7 million for the first nine months, down from $780.3 million in the year-ago period.

2022 Guidance Updated

Martin Marietta updated its guidance for the current year, considering the first nine months’ result, ongoing inflationary pressure and lower aggregates volume. The updated guidance excludes businesses classified as discontinued operations and the gain on divestiture from the second quarter of 2022.

The company expects consolidated products and services revenues in the range of $5,740-$5,845 million (compared with $5,770-$5,910 million expected earlier), gross profit in the $1,445-$1,510 million band (earlier expected in the $1,500-$1,585 million range), selling, general and administrative expenses within $390-$400 million as well as adjusted EBITDA between $1,610 million and $1,675 million (versus $1, 670-$1,750 million expected earlier).

Interest expenses are likely to be within the $165-170 million range (versus $160-165 million expected earlier) and the tax rate is projected in the range of 22-23% (versus 21-22% projected earlier). Net earnings are anticipated in the $740-$800 million range versus the earlier projection of $780-$870 million. Capital expenditures are anticipated in the $450-500 million range, lower than the earlier expectation of $525-550 million.

Within the Building Materials business, total aggregate shipment growth is now expected in the range of 4-5% versus the prior projection of 5.5-8%. Organically, it is likely to be negative 1-00%, down from prior anticipation of 1-2.5%. Aggregates products and services revenues are expected in the $3,525-$3,575 million range compared with the $3,565-$3,640 million projected earlier. Total aggregate pricing per ton is expected to grow between 10% and 12%. Gross profit is likely to be in the $995-$1,035 million band.

Cement, Ready Mixed Concrete and Asphalt and Paving, and Magnesia Specialties Businesses’ products and services revenues are narrowed to $610-$625 million, $1,710-$1,745 million and $285-290 million range, respectively, versus $610-$630 million, $1,705-$1,750 million and $285-295 million. Gross profit for these three businesses is likely to be in the band of $210-$220 million, $150-$160 million, and $90-$95 million, respectively.

2023 Preliminary View

The company anticipates aggregates shipments to be effectively flat as it expects stronger demand from public infrastructure and heavy non-residential projects of scale, offset by single-family residential softening. It expects aggregates pricing growth in low-double-digit as the carryover effects from multiple actions taken this year are combined with additional price increases, beginning in January 2023.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -10.62% due to these changes.

VGM Scores

At this time, Martin Marietta has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Martin Marietta has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.