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Martin Marietta (MLM) to Post Q2 Earnings: What's in Store?

Martin Marietta Materials, Inc. MLM is scheduled to report second-quarter 2019 results on Jul 30, before the opening bell.

In the last reported quarter, the company’s earnings and revenues surpassed the Zacks Consensus Estimate by 0.7% and 3.1%, respectively. Markedly, Martin Marietta reported better-than-expected earnings in three of the last four quarters, with the average positive surprise being 38.7%.

How are Estimates Faring?

Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release.

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has declined from $3.13 to $3.08 over the past 30 days. This indicates a decrease of 5.2% from $3.25 per share reported in the year-ago quarter. Revenues are expected to be $1.2 billion, up 6.6% from the year-ago reported figure of $$1.13 billion.

Martin Marietta Materials, Inc. Price and EPS Surprise

Martin Marietta Materials, Inc. Price and EPS Surprise

Martin Marietta Materials, Inc. price-eps-surprise | Martin Marietta Materials, Inc. Quote

Let’s see how things are shaping up for this announcement.

Robust Infrastructure Demand to Drive Growth: While private construction has shown signs of slowdown in recent months, the public sector has displayed acceleration. Martin Marietta’s underlying product demand and shipments remain solid across the markets served, which is a positive for the quarter to be reported. Increased infrastructure activity, primarily in the public sector (arising from public funding for highways), is expected to help the company generate higher revenues. Notably, the infrastructure market represents 33% of its first-quarter heritage aggregate shipments.

Large energy sector projects along Texas and Gulf Coast are expected to boost demand for heavy building materials. Again, the non-residential market, representing 37% of first-quarter heritage aggregate shipments, is expected to benefit Martin Marietta via healthy commercial construction activity like distribution center, warehouse, data center and wind turbine projects.

Wet Weather Will Play Spoilsport: Weather-related risks have been affecting Martin Marietta’s performance since the third quarter of 2018. For the to-be-reported quarter, delayed construction owing to wet spring and a slowdown in residential construction remain significant headwinds. Difficult weather conditions in regions like Texas, Illinois and Tennessee will likely affect top-line growth for aggregates producers like Martin Marietta, Summit Materials, Inc. SUM, Vulcan Materials Company VMC and Eagle Materials Inc. EXP, whose businesses are reliant on outdoor construction activity. Second-quarter shipments of Vulcan Materials, which recently released quarterly earnings, are reflective of the above fact. Wet weather affected Vulcan Materials’ shipments in Illinois, Tennessee and Texas. Meanwhile, California experienced another wet quarter. However, shipments increased from the same period last year.

Favorable Price/Cost Scenario: While pricing trends have improved from the last year, costs are expected to remain subdued (mainly diesel and labor to a lesser extent). This combination of a disciplined cost structure and favorable pricing trend will likely provide a meaningful boost to its second-quarter margins.

Overall, the company is well positioned for the second quarter on the back of a strong pipeline of large multi-year energy projects, and improving residential, non-residential, and public construction demand trends. However, delayed construction due to weather-related woes is expected to hurt its second-quarter revenues to some extent. Again, extended maintenance outages and higher rail freight costs are expected to hurt margins of Cement operations.

What Our Model Indicates

Our proven model does not show that Martin Marietta is likely to beat earnings estimates in the to-be-reported quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can see the complete list of today’s Zacks #1 Rank stocks here.

Martin Marietta currently has a Zacks Rank #3 and an Earnings ESP of -0.49%, making surprise prediction difficult. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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