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Why Is Martin Marietta (MLM) Up 20.3% Since Last Earnings Report?

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A month has gone by since the last earnings report for Martin Marietta (MLM - Free Report) . Shares have added about 20.3% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Martin Marietta (MLM - Free Report) Q1 Earnings Miss Estimates, Down Y/Y

Martin Marietta Materials, Inc. reported lower-than-expected earnings in first-quarter 2020. In the quarter under review, the company reported adjusted earnings per share of 41 cents, missing the Zacks Consensus Estimate of 56 cents by 26.8%. The reported figure also decreased by a significant 39.7% from the year-ago level of 68 cents per share. The downside was due to the impact of lower unit production costs on aggregates inventory standards and the prior-year benefit from a change in tax election for a subsidiary.

Total revenues (including Product and services and Freight revenues) in the quarter came in at $958.2 million, up 2% year over year. The upside was mainly attributed to higher shipments and pricing across the Building Materials business in the quarter.

Segment Discussion

The building Materials segment (including aggregates, cement, ready-mixed concrete, asphalt and paving product lines) total revenues were $892.5 million, reflecting an increase of 3.2% year over year.

Within the segment, product and services revenues amounted to $831.1 million, up 2.7% from the year-ago level. Freight revenues of $61.4 million were also up 10% from the year-ago period.

Again in Product and Services, Aggregates’ revenues of $570.3 million improved 4.7% from the year-ago quarter. Also, Cement revenues grew 7.7% year over year to $106.6 million. Ready Mixed Concrete’s revenues, however, declined 10.2% year over year to $189.7 million.

Revenues in Asphalt and paving product lines increased 45.6% from the year-ago quarter to $18.1 million.

Geographically, Mid-America Group operations’ shipments grew 4.4% from the prior-year period, driven by robust warehouse and data center construction activities in Iowa and Indiana. This was offset by lower infrastructure shipments in North Carolina. Pricing in the region improved just 1.4% from the prior-year quarter owing to geographic mix.

Southeast Group operations’ shipments declined 3.2% from the prior-year quarter due to unfavorable weather on account of heavy rains. Pricing, however, improved 4.7% in the quarter owing to underlying strength in North Georgia and Florida markets.

West Groups’ aggregate shipments grew 2.5% from a year ago, driven by strong underlying Colorado demand. This was partly offset by weather-impacted construction delays in Texas. Pricing grew 3.7% year over year.

The Magnesia Specialties segment — including magnesium oxide, magnesium hydroxide and dolomite lime products — reported total revenues of $65.7 million, decreasing 11.3% year over year. The downside was due to persistent decline in chemicals products, attributable to international customers’ rationalized inventory levels.

Operating Highlights

Consolidated gross margin during the quarter came in at 14.9%, decreasing 30 basis points. Also, adjusted EBITDA of $149 million declined 5.8% year over year.

Liquidity and Cash Flow

As of Mar 31, 2020, Martin Marietta had cash and cash equivalents of $424 million compared with $21 million at 2019-end. Long-term debt (excluding current maturities) was $2.62 billion compared with $2.43 at 2019-end. Net cash provided by operations was $106.7 million at first quarter-end, down from $117.9 million in the comparable period of 2019.

It had $757.7 million of unused borrowing capacity on the existing credit facilities as of Mar 31, 2020. In March 2020, the company issued $500 million of 2.5% senior notes due 2030. It intends to use the net proceeds for the repayment of $300 million of floating rate notes maturing in May 2020 and for general corporate purposes. Excluding the $300 million earmarked for the May 2020 debt repayment, the company had approximately $880 million of available liquidity on Mar 31, 2020.

Given the level of uncertainty surrounding the coronavirus pandemic, it has withdrawn its earlier issued full-year 2020 guidance.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 5.94% due to these changes.

VGM Scores

Currently, 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 trending upward for the stock, and the magnitude of this revision looks promising. Notably, Martin Marietta has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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