5 Stocks with Moat Rating Changes This Month

Economic moat ratings, which reflect a company’s durable competitive advantages, are at the heart of Morningstar’s stock-picking methodology. Companies with competitive advantages that are seen as lasting at least 20 years are assigned wide moats. Those seen as able to fend off competition for 10–20 years receive narrow moats. Companies which analysts do not believe possess significant competitive advantages are not assigned moats. When combined with low valuations, stocks with moats have historically had a greater chance of outperforming over the long term.

With moats’ multi-decade focus, these ratings are not often reassigned. But changes within a company or its competitive landscape can lead Morningstar’s equity analysts to adjust ratings. According to Allen Good, who heads Morningstar’s moat rating committee, “We take a long-term perspective when assigning moat ratings, so they are unlikely to change frequently. News events may create volatility in share prices, but that does not mean a company’s competitive position has changed meaningfully. However, analysts are continually testing their assumptions and evaluating a company’s advantages. When an analyst determines something fundamental has changed to impact a company’s longer-term outlook, a moat rating change may be necessary.”

Once a month, we screen US-listed stocks covered by Morningstar analysts for any changes in moat ratings. Since Sept. 9, of the 872 stocks on the list, five companies saw changes in their moat ratings. Two stocks were upgraded, while three were downgraded.

Economic Moat Ratings Across Morningstar’s US Coverage

Following this month’s changes, of the 872 US-listed stocks covered by Morningstar, 217 have wide moats, 361 have narrow moats, and 294 have no moat. 34% have no moat, 41% have narrow moats, and 25% have wide moats.

How Economic Moat Ratings Work

Morningstar’s economic moat rating is a key element in evaluating a company’s long-term competitive advantage and its ability to generate excess returns on capital over many years. Morningstar equity analysts determine a company’s economic moat by examining how well it can maintain or grow its market position. A moat helps protect a company’s profits from rivals. Some businesses are better equipped to preserve these advantages over time, while others operate in more competitive or vulnerable industries.

A company with a strong and enduring competitive advantage can often command better pricing, retain loyal customers, and operate more efficiently. These qualities support long-term value creation, which is especially important when evaluating a stock’s potential for superior long-term returns.

Morningstar identifies five primary sources that contribute to a company’s economic moat:

• Switching Costs: Barriers that discourage customers from changing providers due to time, expense, or inconvenience.
• Network Effects: The increasing value of a product or service as more people use it, reinforcing its dominance.
• Intangible Assets: Patents, regulatory licenses, and brand recognition that give a company a distinct edge.
• Cost Advantage: The ability to deliver goods or services at a lower cost than competitors, leading to greater margins or price competitiveness.
• Efficient Scale: Operating in markets with limited competition due to natural or structural constraints.

Here’s a closer look at the stocks with moat rating changes this month, along with our analysts’ commentary.

Martin Marietta MLM

• Morningstar Rating
  : ★★★
• Sector
  : Basic Materials
• Industry
  : Building Materials

We assign Martin Marietta a wide moat based on intangible assets and cost advantage, and we expect the firm to generate returns above its weighted average cost of capital for at least the next 20 years. The moat is primarily supported by its aggregates segment and the newly added lime production business.

Aggregates currently account for around 80% of the company’s revenue, and Martin supplies aggregates through a network of approximately 400 quarries and distribution yards. Aggregates are heavy, low-value-to-weight raw materials extracted by drilling and blasting rock from quarries or pits, then crushing, screening, and washing the material into graded sizes for sale. Quarry owners benefit from high barriers to entry because opening a new site requires extensive permitting and regulatory approvals. Approvals have become increasingly difficult, and the process can take up to 10 years from land acquisition to the first sale of materials. Opposition from local communities can further delay or prevent new development. These barriers significantly limit the addition of new capacity in established markets. With quarry lives typically spanning over 50 years, an existing permit can protect an incumbent’s market position for decades. We view these difficult-to-obtain permits as an intangible asset moat source for aggregate producers.

Vulcan Materials VMC

• Morningstar Rating
  : ★★★
• Sector
  : Basic Materials
• Industry
  : Building Materials

We are upgrading Vulcan’s Morningstar Economic Moat Rating to wide from narrow, and we expect the firm to generate returns above its weighted average cost of capital for at least the next 20 years. The moat is primarily supported by its aggregates business, where difficult-to-obtain regulatory permits limit new supply and the product’s low value to weight ratio restricts how far it can be economically transported. Together, these factors create highly localized markets with limited competition and strong pricing power.

Aggregates currently account for around 75% of the company’s revenue and Vulcan supplies aggregates through a network of approximately 425 aggregate sites. Aggregates are heavy, low value to weight raw materials extracted by drilling and blasting rock from quarries or pits, then crushing, screening, and washing the material into graded sizes for sale. Quarry owners benefit from high barriers to entry because opening a new site requires extensive permitting and regulatory approvals. Approvals have become increasingly difficult, and the process can take up to 10 years from land acquisition to the first sale of materials. Opposition from local communities can further delay or prevent new development. These barriers significantly limit the addition of new capacity in established markets. With quarry lives typically spanning over 50 years, an existing permit can protect an incumbent’s market position for decades. We view these difficult-to-obtain permits as an intangible asset moat source for aggregate producers.

Corteva CTVA

• Morningstar Rating
  : ★★★★
• Sector
  : Basic Materials
• Industry
  : Agricultural Inputs

We award Corteva a narrow Morningstar Economic Moat Rating based on the intangible asset moat source as a result of its portfolio of patented crop chemicals. The company’s patented products command pricing power as they protect farmer yields. Corteva’s intangible assets stem from the research and development spending required for the continual development of proprietary crop protection formulations. New product launches also allow Corteva to raise prices, as these are patent protected and help give farmers better results versus existing products in the crop protection market.

Corteva has a formidable portfolio, generating EBITDA margins in the high teens, in line with patented moaty peers and above generic-focused competitors. We estimate around 65% of sales come from patented and differentiated crop protection products, which command pricing power as farmers will pay up for the best products that fight difficult-to-kill weeds, insects, and fungi. These are typically priced 25% to 70% higher than off-patent products, which generates EBITDA margins in the 20%-40% range, versus 10% or lower for generics.

Eastman Chemical EMN

• Morningstar Rating
  : ★★★★
• Sector
  : Basic Materials
• Industry
  : Specialty Chemicals

We do not think Eastman has a moat. We think two of its segments possess moat sources—AFP driven by intangible assets through patents, and elements of efficient scale in its fibers segment, which primarily manufactures acetate tow used to make cigarette filters. Notably, the fibers segment earns an outsize portion of company profits, accounting for around 10% of sales but a fifth of company profits. Ultimately, the firm’s excess returns over WACC are too narrow to give us sufficient confidence in a moat, and one moat source stems from a segment facing declining demand and high regulatory uncertainty.

Cigarette-filter demand is mature and declining. Only a handful of global producers make acetate tow, the compound used in filters. The top three players control over two-thirds of global production. A new entrant would add capacity to a market that carries spare capacity and would likely earn less than its cost of capital due to the high cost of building an integrated facility like Eastman’s. We estimate the cost is around $9,200-$14,500 per ton of new capacity, or roughly $356 million for a new 30,000-ton plant (around 10% of global capacity). We estimate the new entrant would need to earn EBITDA margins above 38%-40%—which no incumbent currently does—while adding capacity into the market, to earn a positive return on capital. We find this unlikely. Furthermore, the market is in secular decline, with global cigarette volumes dropping by roughly a third of a percent annually, according to data from Euromonitor. We contend it would not make much sense for competition to open a new facility, as capacity and demand continuously shrink each year.

Making acetate tow requires acetate flake and wood pulp. Eastman describes its facility as the world’s largest and most integrated tow site, and makes acetate flake in-house. Even after 2025 sales fell 20% on customer destocking, fibers still earned a 30% return on invested capital, more than quadruple the company’s 7% (a historically low year). The 10 largest customers took about 65% of 2025 segment sales, and most customers must meet annual minimums on volume contracts. To stave off secularly declining demand, Eastman has since moved to long-term variable-price contracts and is repurposing some tow capacity to make textile fibers, used in fashion.

Celanese CE

• Morningstar Rating
  : ★★★
• Sector
  : Basic Materials
• Industry
  : Chemicals

We think Celanese fails to earn a moat because it overpaid for DuPont’s mobility & materials, or M&M, business in 2022. Moats are uncommon in chemicals. Most products are commodities like plastic resins, adhesives, and plasticizers, so prices are set by the marginal producer’s cost, and few firms earn excess returns over a full commodity cycle. Celanese controls a backward-integrated commodity business and a specialty chemical business. We think each carries elements of competitive advantage: cost-advantaged production in the acetyl chain, or AC, segment and switching costs in engineered materials, or EM. Since the M&M acquisition, Celanese’s business has languished because it failed to realize the acquisition’s expected synergies, and it’s faced a secularly deteriorating demand environment across some end markets, such as European autos.

Acetic acid is made from methanol and carbon monoxide; it is used to make vinyl acetate monomer, or VAM, which has many uses including in adhesives, coating additives, packaging films, and foam. Feedstock cost is the primary consideration in this business when we think about moat because these are commodity-like chemicals. Celanese and a handful of producers with access to cheap US natural gas enjoy lower methanol costs than in regions like China, where methanol is derived from coal. Celanese is the world’s largest acetic acid producer, with around 4.6 million tons of capacity, accounting for roughly 20% of global production. We think the regional position and scale support consistently higher margins than those of overseas competitors. However, we do not think that scale insulates returns in a soft demand market; revenue and profits swing dramatically with housing and coatings demand.

Read More on Moat Ratings and Morningstar’s Stock Investing Methodology

• Read Morningstar’s Guide to Stock Investing to inform your stock-picking process.
• Use the Morningstar Investor screener to build a shortlist of financial-services stocks to research and watch.
• Find more info on the economic moat rating here.
• Here’s how to measure a company’s economic advantage.
• Read our list of wide-moat stocks.
• Learn about stocks with moats that Morningstar analysts think are cheap.
• The best of both worlds: undervalued wide-moat stocks.