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Martin Marietta (MLM) Banks on SOAR Initiatives & Strong Pricing
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Martin Marietta Materials, Inc. (MLM - Free Report) is benefiting from strong pricing gains in aggregates, strength in public construction and accretive acquisitions. Also, emphasis on long-term strategic plans — markedly SOAR (Strategic Operating Analysis and Review) 2025 initiatives bodes well.
The Federal Reserve's decision to maintain interest rates at a 22-year high of 5.25-5.5% brings optimism to the housing market and the related industry. The Federal Open Market Committee (FOMC) hints at potential rate cuts by the end of 2024. This stability provides relief for companies like Martin Marietta, anticipating a reversal in the current single-family housing slowdown. Home prices and borrowing rates are expected to find equilibrium, addressing the demand-supply gap resulting from significant underbuilding over the last decade and homeowners' reluctance to abandon low-rate mortgages.
Shares of this leading supplier of construction aggregates in the United States have gained 41.2% in the past year compared with the Zacks Building Products - Concrete and Aggregates industry’s 37.3% growth.
Image Source: Zacks Investment Research
The Zacks Rank #1 (Strong Buy) company’s 2024 earnings and sales are likely to witness growth of 14% and 9.6% year over year, respectively. Earnings estimates for 2024 have increased 1.3% upward over the past 60 days. This positive trend signifies bullish analysts’ sentiments, indicating robust fundamentals and the expectation of outperformance in the near term.
Let’s discuss the major driving factors.
Strong Aggregates Pricing: Martin Marietta is poised to benefit from pricing improvements and growth initiatives. The Aggregates business anticipates increased sales and profits in the forthcoming quarters, supported by strong underlying demand.
Despite a 7.3% year-over-year decline in aggregate shipments during the third quarter of 2023, a 20% increase in pricing and a focus on a value-over-volume commercial strategy led to significant growth. In the quarter, Aggregates’ revenues rose 8% to $1.22 billion and gross profit grew 32.1% to a record value of $440.6 million year over year. The company remains optimistic about the aggregates-intensive, heavy, non-residential sector. Moreover, the single-family start demand improvements raise hope for the future. For 2023, Martin Marietta now expects total Aggregates pricing per ton to grow 18-20%, up from the previously anticipated range of 17-19%.
In 2024, the company foresees stable aggregate shipments. Increased infrastructure investment and significant activity in large-scale non-residential projects are expected to counterbalance potential weakness in interest rate-sensitive private construction markets.
Robust Public Infrastructure Demand: The U.S. government's infrastructure push benefits aggregate producers like Martin Marietta, with increased demand expected. Although single-family housing faces affordability challenges, public projects and strength in energy and manufacturing provide balance for the company.
As of Sep 30, 2023, highway, bridge and tunnel contract awards increased 18.2% to a record of $114 billion compared with $97 billion as of September 2022's end. In the third quarter of 2023, the infrastructure market accounted for 39% of aggregate shipments.
The new Federal Infrastructure Law and strong state Department of Transportation (DOT) budgets in the company’s key states of Texas, Colorado, North Carolina, Georgia, Florida and California provide Martin Marietta with a long-awaited runway for multi-year growth in infrastructure demand. Martin Marietta believes that its strategic coast-to-coast footprint is well-positioned for long-term growth, backed by favorable population migration trends, housing shortages in markets and a long-term federal highway bill complemented by healthy DOT budgets in its key states.
Long-Term Strategic Plans to Drive Growth: The company achieved its most profitable year in 2021, driven by its long-term strategic plans, SOAR (Strategic Operating Analysis and Review) 2025 initiatives. The company's 11th consecutive year of growth in 2022 included consolidated revenues, adjusted gross profit, and adjusted EBITDA. MLM's strategic focus involves portfolio optimization, expanding core businesses, investing in high-growth markets and pursuing opportunities within existing markets.
Focus on Acquisitions and Divestitures: The company is reviewing its overall portfolio for opportunities to maximize value by monetizing or exchanging select assets. On Nov 21, 2023, MLM entered into a definitive agreement to divest its South Texas cement business and certain of its related concrete operations to CRH plc’s subsidiary, CRH Americas Materials, Inc.
After terminating the agreement with CalPortland for the sale of the Tehachapi California cement plant on May 3, 2023, Martin Marietta finally divested this business to UNACEM Corp. SAA. on Oct 31, 2023. The transaction was completed for $315 million. Also, it divested its California-based Stockton cement import terminal on May 3.
Although the company did not acquire any businesses in the past year or the first nine months of 2023, it has ample flexibility to continue investing in the business and pursuing accretive acquisition opportunities in the future.
Other Key Picks
Some other top-ranked stocks from the Zacks Construction sector are:
The Zacks Consensus Estimate for FLR’s 2024 sales and earnings per share (EPS) suggests growth of 9.3% and 11.1%, respectively, from the year-ago period’s levels.
M-tron Industries, Inc. (MPTI - Free Report) currently sports a Zacks Rank of 1. MPTI delivered a trailing four-quarter earnings surprise of 35.6%, on average. It has surged 335.4% in the past year.
The Zacks Consensus Estimate for MPTI’s 2024 sales and EPS indicates growth of 12.5% and 13.4%, respectively, from the previous year’s levels.
AECOM (ACM - Free Report) carries a Zacks Rank of #2 (Buy). It has a trailing four-quarter earnings surprise of 2.1%, on average. Shares of ACM have increased 8.9% in the past year.
The Zacks Consensus Estimate for ACM’s 2024 sales and EPS indicates an increase of 4.5% and 17.5%, respectively, from the year-ago period’s levels.
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Martin Marietta (MLM) Banks on SOAR Initiatives & Strong Pricing
Martin Marietta Materials, Inc. (MLM - Free Report) is benefiting from strong pricing gains in aggregates, strength in public construction and accretive acquisitions. Also, emphasis on long-term strategic plans — markedly SOAR (Strategic Operating Analysis and Review) 2025 initiatives bodes well.
The Federal Reserve's decision to maintain interest rates at a 22-year high of 5.25-5.5% brings optimism to the housing market and the related industry. The Federal Open Market Committee (FOMC) hints at potential rate cuts by the end of 2024. This stability provides relief for companies like Martin Marietta, anticipating a reversal in the current single-family housing slowdown. Home prices and borrowing rates are expected to find equilibrium, addressing the demand-supply gap resulting from significant underbuilding over the last decade and homeowners' reluctance to abandon low-rate mortgages.
Shares of this leading supplier of construction aggregates in the United States have gained 41.2% in the past year compared with the Zacks Building Products - Concrete and Aggregates industry’s 37.3% growth.
Image Source: Zacks Investment Research
The Zacks Rank #1 (Strong Buy) company’s 2024 earnings and sales are likely to witness growth of 14% and 9.6% year over year, respectively. Earnings estimates for 2024 have increased 1.3% upward over the past 60 days. This positive trend signifies bullish analysts’ sentiments, indicating robust fundamentals and the expectation of outperformance in the near term.
Let’s discuss the major driving factors.
Strong Aggregates Pricing: Martin Marietta is poised to benefit from pricing improvements and growth initiatives. The Aggregates business anticipates increased sales and profits in the forthcoming quarters, supported by strong underlying demand.
Despite a 7.3% year-over-year decline in aggregate shipments during the third quarter of 2023, a 20% increase in pricing and a focus on a value-over-volume commercial strategy led to significant growth. In the quarter, Aggregates’ revenues rose 8% to $1.22 billion and gross profit grew 32.1% to a record value of $440.6 million year over year. The company remains optimistic about the aggregates-intensive, heavy, non-residential sector. Moreover, the single-family start demand improvements raise hope for the future. For 2023, Martin Marietta now expects total Aggregates pricing per ton to grow 18-20%, up from the previously anticipated range of 17-19%.
In 2024, the company foresees stable aggregate shipments. Increased infrastructure investment and significant activity in large-scale non-residential projects are expected to counterbalance potential weakness in interest rate-sensitive private construction markets.
Robust Public Infrastructure Demand: The U.S. government's infrastructure push benefits aggregate producers like Martin Marietta, with increased demand expected. Although single-family housing faces affordability challenges, public projects and strength in energy and manufacturing provide balance for the company.
As of Sep 30, 2023, highway, bridge and tunnel contract awards increased 18.2% to a record of $114 billion compared with $97 billion as of September 2022's end. In the third quarter of 2023, the infrastructure market accounted for 39% of aggregate shipments.
The new Federal Infrastructure Law and strong state Department of Transportation (DOT) budgets in the company’s key states of Texas, Colorado, North Carolina, Georgia, Florida and California provide Martin Marietta with a long-awaited runway for multi-year growth in infrastructure demand. Martin Marietta believes that its strategic coast-to-coast footprint is well-positioned for long-term growth, backed by favorable population migration trends, housing shortages in markets and a long-term federal highway bill complemented by healthy DOT budgets in its key states.
Long-Term Strategic Plans to Drive Growth: The company achieved its most profitable year in 2021, driven by its long-term strategic plans, SOAR (Strategic Operating Analysis and Review) 2025 initiatives. The company's 11th consecutive year of growth in 2022 included consolidated revenues, adjusted gross profit, and adjusted EBITDA. MLM's strategic focus involves portfolio optimization, expanding core businesses, investing in high-growth markets and pursuing opportunities within existing markets.
Focus on Acquisitions and Divestitures: The company is reviewing its overall portfolio for opportunities to maximize value by monetizing or exchanging select assets. On Nov 21, 2023, MLM entered into a definitive agreement to divest its South Texas cement business and certain of its related concrete operations to CRH plc’s subsidiary, CRH Americas Materials, Inc.
After terminating the agreement with CalPortland for the sale of the Tehachapi California cement plant on May 3, 2023, Martin Marietta finally divested this business to UNACEM Corp. SAA. on Oct 31, 2023. The transaction was completed for $315 million. Also, it divested its California-based Stockton cement import terminal on May 3.
Although the company did not acquire any businesses in the past year or the first nine months of 2023, it has ample flexibility to continue investing in the business and pursuing accretive acquisition opportunities in the future.
Other Key Picks
Some other top-ranked stocks from the Zacks Construction sector are:
Fluor Corporation (FLR - Free Report) sports a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 37.5%, on average. Shares of FLR have surged 14.7% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for FLR’s 2024 sales and earnings per share (EPS) suggests growth of 9.3% and 11.1%, respectively, from the year-ago period’s levels.
M-tron Industries, Inc. (MPTI - Free Report) currently sports a Zacks Rank of 1. MPTI delivered a trailing four-quarter earnings surprise of 35.6%, on average. It has surged 335.4% in the past year.
The Zacks Consensus Estimate for MPTI’s 2024 sales and EPS indicates growth of 12.5% and 13.4%, respectively, from the previous year’s levels.
AECOM (ACM - Free Report) carries a Zacks Rank of #2 (Buy). It has a trailing four-quarter earnings surprise of 2.1%, on average. Shares of ACM have increased 8.9% in the past year.
The Zacks Consensus Estimate for ACM’s 2024 sales and EPS indicates an increase of 4.5% and 17.5%, respectively, from the year-ago period’s levels.