Martin Marietta Navigates Soft Residential Construction but Price Growth Provides Near-Term Relief

Martin Marietta is well positioned to benefit from increased U.S. infrastructure spending. Although mainly an aggregates producer, the company also has cement production in Texas. We forecast strengthening demand growth for the public sector and modest growth for the private sector. Accounting for roughly half of shipments, public-sector demand is generally more stable, and projects, primarily highway construction, are more aggregate-intensive per dollar of spending. However, in recent years, this sector's demand has been low relative to historical levels amid underfunding that has led to worsening conditions. Federal funding power has weakened over time, as better vehicle mileage and inflation have diminished the buying power of the $0.18 per gallon gasoline tax, unchanged since 1993. The FAST Act, passed in December 2015, provided stability and near-term funding certainty, but did not solve the still-weakening gas tax. However, long-term federal funding was passed in late 2021, totaling $1.2 trillion.