Company Reports

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.

Narrow-moat-rated Martin Marietta reported solid fourth-quarter results that capped off a strong year for the company. Martin Marietta continues to flex its pricing power across its portfolio as all four segments experienced selling price growth. Conversely, shipments were down in the quarter from a year ago for three of its four core segments as Martin Marietta navigates moderating end-market demand. Martin Marietta’s focus on value over volume continues to bear fruit for the firm and management has shown no sign of letting up on pricing actions. While we expect shipments to face headwinds for much of 2024, we expect this will largely be offset by additional pricing gains during the year. As such, we have increased our fair value estimate to $350 from $330 per share.

Martin Marietta announced it has reached a deal with CRH Americas Materials to sell its South Texas cement business and some other related concrete operations for $2.1 billion in cash. Martin Marietta is selling its Hunter cement plant in New Braunfels, Texas, and 20 concrete plants in Texas as well. The assets included in the sale are estimated to generate $170 million in pro forma 2023 EBITDA, representing a 12.4 times multiple for the deal. While Martin Marietta is selling assets in the fast-growing Texas cement market, we think the company received a fair price for the business and will likely use the proceeds to improve its aggregates business. As such, we have increased our fair value estimate to $330 from $325 per share.

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.

Narrow-moat-rated Martin Marietta reported third-quarter results with few surprises. Net sales rose 10% year over year as the company enjoyed strong pricing amid moderating demand for most of its building materials. Aggregate shipments fared worse in the quarter as Martin Marietta navigates a slowdown in new residential construction that has been somewhat offset by heavy nonresidential and infrastructure demand. We expect shipments to remain pressured through the end of the year, but accelerating infrastructure spending should provide some relief in 2024. We've increased our fair value estimate to $325 per share from $323 due to the time value of money.

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.

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 didn't solve the still-weakening gas tax. However, long-term federal funding was passed in late 2021, totaling $1.2 trillion.

Narrow-moat-rated Martin Marietta Materials reported solid second-quarter results as a slowdown in shipments was more than offset by pricing gains across its portfolio. Net sales increased 11% year over year as three of its four primary segments reported double-digit growth in average selling prices. Despite near-term pressure on shipments, Martin Marietta continues to flex its pricing power, which we expect will offset shipment headwinds through the end of the year. As such, we've increased our fair value estimate to $323 per share from $304 due to higher near-term profitability in our forecast.

Narrow-moat-rated Martin Marietta reported strong first-quarter results as the building materials giant continued to flex its pricing power. Net sales increased 10% year over year, led by double-digit price growth across its four primary segments. That said, shipments were down across the board, with ready-mix concrete and asphalt posting double-digit declines. Nevertheless, gross margins reached nearly 22.5% in the quarter, up substantially from 12.7% a year ago but down roughly 150 basis points sequentially due to higher operating and material costs. We've increased our fair value estimate to $304 from $296 per share, mainly due to time value of money.

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 didn't solve the still-weakening gas tax. However, long-term federal funding was passed in late 2021, totaling $1.2 trillion.

Narrow-moat-rated Martin Marietta reported solid fourth-quarter results on strong aggregate and cement pricing gains. Construction end markets in much of the U.S. held up during the fourth quarter, but volumes were down across the company’s products against tough comps and softening demand. Net sales decreased 1% year over year as higher selling prices and the benefit of acquisitions were more than offset by lower volumes. Gross margins improved roughly 80 basis points year over year to 24% but declined 290 basis points sequentially. Pricing remains strong across Martin Marietta’s portfolio, with all product lines seeing double-digit price growth in 2022.

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 didn't solve the still-weakening gas tax. However, long-term federal funding was passed in late 2021, totaling $1.2 trillion.

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 didn't solve the still-weakening gas tax. However, long-term federal funding was passed in late 2021, totaling $1.2 trillion.

Martin Marietta reported solid third-quarter results that were largely in line with our expectations. Net sales increased 16% year over year due to higher selling prices and the addition of acquisitions. Volumes remained relatively flat across the business when compared with a year ago as logistical challenges constrained shipments. Gross margins declined 150 basis points to 26.9%, but improved 100 basis points sequentially. Higher energy and freight costs were mostly offset by previously announced pricing actions across the business.

Narrow-moat-rated Martin Marietta's second-quarter results were largely in line with our expectations. While top line growth was strong, margins were pressured from continued cost inflation. Net sales increased 19% year over year as aggregates, cement, and asphalt all saw double digit volume growth. Gross margins declined roughly 200 basis points to 25.9% compared to a year ago due to higher energy and freight costs. These additional costs were partially offset by pricing action taken in April. Management noted that there will be broad third-quarter price increases across all products and they will likely take additional pricing action in the fourth quarter.

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 didn't solve the still-weakening gas tax. However, long-term federal funding was passed in late 2021, totaling $1.2 trillion.

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 didn't solve the still-weakening gas tax. However, long-term federal funding was passed in late 2021, totaling $1.2 trillion.

After taking a fresh look at our thesis for Martin Marietta, we have lowered our fair value estimate 9% to $286 per share due to our moderated near-term forecast amid heightened economic uncertainty. We are maintaining our narrow economic moat and stable trend ratings as we believe the company benefits from strong intangible assets and a cost advantage driven by its quarry permits and high transportation costs.

Narrow-moat-rated Martin Marietta's first-quarter results were in line with our expectations. Rising cost inflation continues to be the story, as the company’s gross margins (excluding freight and delivery) declined over 530 basis points to 13.6% in the quarter compared with the same period a year ago. That said, we think Martin Marietta will be able to increase prices in the near term to offset cost pressure in the second half of 2022. This leads us to forecast 28.4% gross margins for the full year, roughly in line with 2020 levels (compared with 26.5% in 2021). Looking at sales, the company earned $1.1 billion, which was up 25% year on year compared with the first quarter of 2021, largely due to strong pricing. In 2022, we project Martin Marietta’s top line to grow by 15% year on year to $5.8 billion.

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.