Why Is Martin Marietta (MLM) Down 4% Since Last Earnings Report?

It has been about a month since the last earnings report for Martin Marietta (MLM). Shares have lost about 4% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Martin Marietta due for a breakout? 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’s (MLM) Q1 Earnings Beat Estimates

Martin Marietta Materials (NYSE:MLM), Inc. reported better-than-expected results in first-quarter 2019, backed by solid segmental performance, higher shipments, and strong pricing and cost-management efforts.

The company’s adjusted earnings came in at 68 cents per share, surpassing the Zacks Consensus Estimate of 21 cents. Also, the reported figure increased significantly from the year-ago level of 16 cents per share.

Total revenues (including Product and services and Freight revenues) of $939 million increased 17.1% year over year.

Segment Discussion

The Building Materials business includes aggregates, cement, ready-mixed concrete, asphalt and paving product lines. Total revenues from the said segment increased 18% year over year to $864.9 million. Product and services revenues amounted to $809.1 million, up 17.5% from $688.4 million a year ago. Freight revenues totaled $55.6 million, up 25.8% from the year-ago figure of $44.3 million.

Within Product and Services, Aggregates’ total revenues amounted to $541.5 million, increasing 27.4% from the year-ago quarter. Cement revenues also grew 11% to $99 million from $89.2 million in the year-ago quarter. However, Ready Mixed Concrete’s total revenues declined 3.4% year over year to $211.2 million. Asphalt and paving product lines revenues also fell 3.1% from the year-ago quarter to $15.8 million.

Heritage aggregates’ pricing and shipments improved 4% and 12.5%, respectively, in the reported quarter. Moreover, pricing and shipments, including acquisitions and divestitures, increased 2.3% and 24.2%, respectively, year over year.

Geographically, Mid-America Group heritage operations’ shipment grew 18.4% from the prior-year period, owing to infrastructure, commercial and residential projects in the Carolinas. Pricing in the said region also grew 3.1% on the back of increased shipments of lower-priced base stone in 2019.

The Southeast Group heritage operation also reported an increase of 16.7% from the prior-year quarter, given strength of North Georgia and Florida markets. Moreover, West Groups’ aggregate shipments improved 6.3% from a year ago, primarily backed by strong non-residential construction activity in Texas, which more than offset weather-related impact in Colorado.

The Magnesia Specialties segment, which includes magnesium oxide, magnesium hydroxide and dolomite lime products, reported total revenues of $74.1 million, up 6.9% year over year. The upside was driven by strong domestic steel production and increased global demand for magnesia chemical products.

Operating Highlights

Consolidated gross margin improved 140 basis points (bps) to 15.2%. Its earnings from operations jumped 77.1% from the year-ago level to $69.2 million. Also, adjusted EBITDA of $158.9 million increased 28.2% year over year.

Liquidity and Cash Flow

Martin Marietta's cash and cash equivalents as of Mar 31, 2019 were $37.4 million compared with $44.9 million recorded on Dec 31, 2018. Net cash provided by operations came in at $117.9 million at the end of first-quarter 2019 compared with $105 million in the comparable period of 2018.

2019 View Reaffirmed

Total revenues in 2019 are expected in the band of $4.480-$4.680 billion. Gross profit is projected in the range of $1,110-$1,210 million. The company expects EBITDA within $1.17-1.28 billion. The company also expects capital expenditure in the range of $350-$400 million.

Aggregates Product line total revenues are projected in the range of $2.80-$2.91 billion. Aggregates volume growth is expected in the range of 6-8%. Average selling price is likely to grow 3-5% from a year ago. Cement total revenues are estimated in the band of $420-$450 million. Ready Mixed Concrete and Asphalt and Paving’s total revenues are anticipated within $1.24-$1.31 billion.

The company expects Magnesia Specialties Business’ net sales between $290 million and $300 million.

Moreover, within Aggregates, Infrastructure shipments are likely to grow in high-single digits. Non-residential shipments are also projected to increase in mid-high single digits. Moreover, residential shipments are expected to rise in mid-single digits. ChemRock/Rail shipments are likely to marginally increase from the prior-year figure.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Martin Marietta has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, 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 C. 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. It comes with little surprise Martin Marietta has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.