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Martin Marietta (MLM) Down 20.6% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Martin Marietta (MLM - Free Report) . Shares have lost about 20.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Martin Marietta due for a breakout? 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 drivers.

Martin Marietta (MLM - Free Report) Q4 Earnings Miss Estimates, Up Y/Y

Martin Marietta Materials, Inc. reported lower-than-expected fourth-quarter 2019 earnings. Nonetheless, the company highlighted 2019 as the most profitable year in its history. Improved shipments, pricing and profitability across the major part of the Building Materials business helped it to achieve the eighth consecutive year of growth in revenues, gross profit, adjusted EBITDA and earnings per share.

In the quarter under review, the company reported adjusted earnings per share of $2.09, missing the Zacks Consensus Estimate of $2.18 by 4.1%. However, the reported figure increased an impressive 39.3% from the year-ago level of $1.50 per share.

Total revenues (including Product and services and Freight revenues) in the quarter came in at $1,100.4 million, up 7.9% year over year. The upside was mainly attributable to double-digit growth in cement shipments. Also, higher shipments in the aggregates business led to the upside.

Segment Discussion

The Building Materials segment (including aggregates, cement, ready-mixed concrete, asphalt and paving product lines) total revenues were $1,044.3 million, reflecting an increase of 10.1% year over year.

Within the segment, product and services revenues amounted to $973.7 million, up 9.6% from the year-ago level. Freight revenues of $70.6 million were also up 18.8% from the year-ago period.

Again, in Product and Services, Aggregates’ revenues of $635.3 million improved 9.6% from the year-ago quarter. Also, Cement’s revenues grew 23.9% year over year to $108.1 million. Ready Mixed Concrete’s revenues also improved 4.9% year over year to $223.9 million. Revenues in Asphalt and paving product lines increased 2.2% from the year-ago quarter to $68.4 million.

Geographically, Mid-America Group operations’ shipments grew 3.5% from the prior-year period, driven by wind energy and data center projects in the Midwest. Pricing in the said region improved only 1% from the prior-year quarter owing to lower infrastructure shipments and unfavorable product mix. Southeast Group operations inched up 7.5% from the prior-year quarter on the back of strong private-sector construction activity in North Georgia and Florida markets, and 3% growth in pricing. This upside was partially offset by infrastructure project delays. Moreover, West Groups’ aggregate shipments grew 3.4% from a year ago, driven by strong underlying Texas demand. This was partly offset by Colorado’s weather-impacted construction delays and unanticipated operating downtime. Pricing grew 12.9% year over year.

The Magnesia Specialties segment — including magnesium oxide, magnesium hydroxide and dolomite lime products — reported total revenues of $56.1 million, decreasing 22% year over year. Its product revenues decreased 24.1% to $51 million. The downside was due to international chemicals and domestic lime customers rationalized inventory levels.

Operating Highlights

Consolidated gross margin during the quarter came in at 23.5%, improving 120 basis points (bps). Selling, general and administrative expenses — as a percentage of total revenues — improved 30 bps year over year. Also, adjusted EBITDA of $278.8 million grew 11.4% year over year.

Liquidity and Cash Flow

As of Dec 31, 2019, Martin Marietta had cash and cash equivalents of $21 million compared with $44.9 million in the corresponding period of 2018. Net cash provided by operations was $966.1 million at the end of 2019 compared with $705.1 million in the comparable period of 2018.

2019 Highlights

Earnings came in at $9.74 per share, increasing 31.1% year over year. Total revenues of $4,739.1 million also advanced 11.7% from the 2018 level.

2020 Guidance

Backed by solid underlying demand and third-party forecasts, Martin Marietta raised its full-year 2019 guidance. Total revenues for 2020 are expected in the band of $4,875-$5,075 million. The Zacks Consensus Estimate for 2020 revenues is currently pegged at $4,740 million. Gross profit is projected in the range of $1,295-$1,390. The company expects adjusted EBITDA within $1,347.5-$1,452.5 million. It expects capital expenditure in the range of $425-$475 million. Aggregates Product line total revenues are projected in the range of $3,185-$3,295 million. Aggregates volume growth is expected in the range of 2-4%. Average selling price is likely to grow 4-6% from a year ago. Cement total revenues are estimated in the band of $470-$500 million. Ready Mixed Concrete and Asphalt and Paving’s Products and Services revenues are anticipated within $1,255-$1,325 million. The company expects Magnesia Specialties Business’ net sales between $265 million and $275 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -10.19% due to these changes.

VGM Scores

Currently, Martin Marietta has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. 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 C. 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. Notably, Martin Marietta has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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