Martin Marietta Materials, Inc.
) delivered strong second-quarter 2014 results, beating the Zacks
Consensus Estimate for both earnings and revenues as the aggregates
business did significantly well in the quarter. The leading
supplier of aggregates and heavy building materials also raised its
volume expectations for the full year.
Martin Marietta's second-quarter earnings of $1.34 per share
beat the Zacks Consensus Estimate of $1.23 and increased 50.6% year
over year. The double-digit increase in earnings was driven by
strong sales and lower costs.
Net sales of $601.9 million increased 18.7% year over year and
beat the Zacks Consensus Estimate of $555 million by 8.5% driven
largely by improved volume and pricing in the aggregate business
which accounts for almost 90% of the company's net sales. Freight
and delivery revenues were $67.3 million, up 24.6% year over
business' total revenue grew almost 20% to $540 million driven by
shipment (volume) growth of 12.7% and pricing gain of 5% in the
aggregates products line. While the strongest shipment growth was
seen in the west group, aggregates pricing was the highest in the
The company saw aggregates volume growth in all the end markets
with particular strength in private construction. Shipments grew
16% in the non-residential market due to strength in the energy and
commercial sectors and 20% in private residential market due to
improving housing starts. Public construction shipments, comprising
45% of the aggregates product line, increased 9% in the quarter
seeing strength in the west and southeast groups.
The aggregates business also includes Martin Marietta's
vertically-integrated operations, i.e., asphalt products, ready
mixed concrete and road paving construction services. All these
product lines also witnessed improved sales in the quarter.
segment which provides magnesium oxide, magnesium hydroxide, and
dolomite lime products grew 9.4% year over year to $61.9 million
driven by growth in the chemicals product line.
Total adjusted gross margin (excluding freight and delivery
revenues) increased 140 basis points (bps) to 22.5% driven by
strong revenues. Aggregates business' gross margin (excluding
freight and delivery revenues) grew 170 bps to 20.7%. Specialty
segment's gross margins grew 20 bps to 37.8%.
Adjusted consolidated earnings were $101.5 million in the
quarter, up more than 30% year over year driven by strong gross
margins and low overhead costs.
Impressive 2014 Outlook
The company raised its full-year aggregates product line volume
guidance to a range of 6% to 8% from 2013 levels, higher than 4-5%
While private construction is expected to remain strong,
management expects the non-residential construction activity to
grow in both heavy industrial and commercial sectors. Public
construction activity is expected to gain from increased highway
funding and state government funding of infrastructure
Aggregates product line pricing is expected to increase 3% to 5%
Sales in the Specialty Products segment are expected between
$225 million and $235 million while that in the vertically
integrated businesses are expected within $385 to $405 million.
Moreover, Martin Marietta's purchase of Texas Industries, Inc.
earlier this month further sealed the former's position in the
aggregates market as well as increased its concrete presence in
high-end markets like Texas. It also exposed Martin Marietta to the
growing cement markets in Texas and California.
In order to resolve competition issues with respect to the
acquisition, Martin Marietta entered into a deal with the U.S.
Department of Justice (DOJ) to divest its North Troy aggregate
quarry in Mill Creek, OK and its two rail yards sites in Dallas and
Frisco, TX. The assets will be divested in the second half of the
Also, in connection with the acquisition, Martin Marietta issued
$700 million of senior year notes.
Other Stocks to Consider
Martin Marietta Materials carries a Zacks Rank #3 (Hold).
Investors interested in the building construction/building
products sector can consider stocks like Beazer Homes USA Inc. (
), United Rentals, Inc. (
) and Quanex Building Products Corporation (
). All the three companies have a Zacks Rank #2 (Buy).
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