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Factors Likely to Shape Martin Marietta's (MLM) Q1 Earnings

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Martin Marietta Materials, Inc. (MLM - Free Report) is scheduled to report first-quarter 2020 results on May 5, before the opening bell.

In the last reported quarter, the company’s earnings missed the Zacks Consensus Estimate by 4.1% but revenues beat the same by 0.5%. On a year-over-year basis, earnings and revenues of this aggregates producer grew 39.3% and 7.9%, respectively. The upside was mainly attributed to higher shipments in the aggregates business and margin improvement.

Martin Marietta reported better-than-expected earnings in two of the last four quarters, with the average positive surprise being 35.3%.

Trend in Estimate Revision

The Zacks Consensus Estimate for first-quarter earnings is pegged at 56 cents per share, which suggests a 17.7% decrease from 68 cents reported in the year-ago period. Notably, earnings estimates for the quarter have decreased 9.7% over the past 30 days. The consensus mark for revenues is pegged at $892.9 million, which calls for a 1.7% increase from the prior-year reported figure.

Let’s discuss the factors that are likely to reflect on the upcoming quarterly results.

Factors to Note

Martin Marietta — similar to other aggregate producers like Summit Materials, Inc. (SUM - Free Report) , Vulcan Materials Company (VMC - Free Report) and Eagle Materials Inc. (EXP - Free Report) — is expected to have generated lower year-over-year earnings in the first quarter, given strong first-half 2020 comparisons and reduced state DOT spending. Martin Marietta’s business and earnings are sensitive to changes in construction spending, particularly housing and public construction in Texas, Colorado, North Carolina, Georgia, Florida, and Iowa.

The company expects modest but transitory headwinds in road maintaining spending in the first half of 2020 as North Carolina DOT works through some temporary cash flow issues. Notably, North Carolina is Martin Marietta’s third largest state in terms of revenues. Notably, the infrastructure market represented 35% of its 2019 aggregate shipments.

Nonetheless, large energy sector projects along the Texas and Gulf Coast are expected to have boosted demand for heavy building materials, and helped Martin Marietta in sales generation. Again, healthy commercial construction activities like growth in distribution centers, warehouses, data centers and wind turbine projects in the non-residential market (which represented 36% of 2019 aggregate shipments) are expected to have aided the company’s first-quarter performance.

Solid residential construction (which accounted for 22% of 2019 aggregate shipments) in most part of the first quarter is expected to have contributed to its top line.

However, widespread slowdown in economic activity owing to the coronavirus outbreak is expected to have impacted the company’s business operations and demand for products in the latter part of March.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Martin Marietta this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Martin Marietta currently carries a Zacks Rank #4 (Sell) and has an Earnings ESP of -0.59%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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