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Martin Marietta (MLM) to Divest Certain Operations for $250M
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In line with the Strategic Operating Analysis and Review (SOAR) 2025 plan, Martin Marietta Materials, Inc. (MLM - Free Report) has inked a deal with CalPortland Company to sell certain California-based West Coast cement and ready mixed concrete operations for $250 million in cash. The operations include the Redding cement plant, related cement distribution terminals and 14 ready-mixed concrete plants. The deal is likely to close in second-half 2022, subject to certain regulatory approvals and other customary closing conditions.
Post the news release, MLM stock fell almost 3.8% on Mar 1.
Ward Nye, the chairman, president and CEO of Martin Marietta, said, “Consistent with our SOAR 2025 plan, we continually look for ways to optimize our portfolio and product mix through asset swaps and divestitures. After thoughtful evaluation, we determined that monetization of these operations is the best avenue to maximize value for all stakeholders.”
Image Source: Zacks Investment Research
The company also intends to sell the Tehachapi cement plant and related cement distribution terminals.
Inorganic Moves Bode Well
Martin Marietta has been banking on long-term strategic plans, commonly known as SOAR. MLM’s SOAR 2025 plan includes the ongoing evaluation of aggregates-led opportunities of scale in new domestic markets, expansion through acquisitions that complement the existing operations and divestiture of assets that are not consistent with the stated strategic goals. On that note, it is to be noted that the company invested $3.1 billion in acquisitions in 2021.
On Oct 1, 2021, Martin Marietta completed its largest acquisition of Lehigh Hanson, Inc.’s West Region business for $2.3 billion in cash, thereby propelling growth in California and Arizona.
The company’s priorities are focusing on value-enhancing acquisitions, prudent organic capital investment and consistent return of capital to shareholders while maintaining an investment-grade rating profile.
That said, higher diesel and raw material costs along with adverse weather raise concerns for MLM and other Zacks Building Products - Concrete and Aggregates industry players like Vulcan Materials Company (VMC - Free Report) , Summit Materials, Inc. (SUM - Free Report) and Cornerstone Building Brands, Inc. .
We believe that the recent move and improved pricing as well as disciplined cost management throughout the business will help it to mitigate these risks.
Vulcan Materials Company: Vulcan’s focus on four strategic initiatives — Commercial Excellence, Operational Excellence, Strategic Sourcing, and Logistics Innovation — will enhance price performance as well as operating efficiencies. Vulcan has been generating higher earnings despite tepid revenues on the back of prudent cost-control efforts and increased pricing in aggregates. Its focus on a systematic inorganic strategy for expansion is adding to the positives.
VMC holds a Zacks Rank #3. It has gained 2.4% over the past year. The company’s 2022 earnings are expected to increase 26%.
Summit Materials: Migration activity amid the pandemic continues to favor rural and exurban markets. Additionally, the strong execution of its Elevate Summit strategy and higher average selling prices for aggregates have been aiding the company to drive growth. It remains focused on sustainable improvement via investments in greenfields and end markets that are underpinned by sturdy growth fundamentals.
Summit Materials has a Zacks Rank #2 (Buy). The company’s earnings estimates for 2022 are expected to grow 37.5%.
Cornerstone Building Brands: This Cary, NC-based company is gaining traction, courtesy of higher volume leverage on robust demand for residential products and benefits from cost-reduction initiatives. Although Cornerstone Building Brands has been experiencing supply chain disruptions, strong residential end markets have been helping it navigate through the situation. The company’s strong operational execution is positioning Cornerstone Building Brands for long-term profitable growth.
Cornerstone Building currently carries a Zacks Rank #3 and has gained 88.7% over the past year. The company’s 2022 earnings are expected to increase 39.3%.
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Martin Marietta (MLM) to Divest Certain Operations for $250M
In line with the Strategic Operating Analysis and Review (SOAR) 2025 plan, Martin Marietta Materials, Inc. (MLM - Free Report) has inked a deal with CalPortland Company to sell certain California-based West Coast cement and ready mixed concrete operations for $250 million in cash. The operations include the Redding cement plant, related cement distribution terminals and 14 ready-mixed concrete plants. The deal is likely to close in second-half 2022, subject to certain regulatory approvals and other customary closing conditions.
Post the news release, MLM stock fell almost 3.8% on Mar 1.
Ward Nye, the chairman, president and CEO of Martin Marietta, said, “Consistent with our SOAR 2025 plan, we continually look for ways to optimize our portfolio and product mix through asset swaps and divestitures. After thoughtful evaluation, we determined that monetization of these operations is the best avenue to maximize value for all stakeholders.”
Image Source: Zacks Investment Research
The company also intends to sell the Tehachapi cement plant and related cement distribution terminals.
Inorganic Moves Bode Well
Martin Marietta has been banking on long-term strategic plans, commonly known as SOAR. MLM’s SOAR 2025 plan includes the ongoing evaluation of aggregates-led opportunities of scale in new domestic markets, expansion through acquisitions that complement the existing operations and divestiture of assets that are not consistent with the stated strategic goals. On that note, it is to be noted that the company invested $3.1 billion in acquisitions in 2021.
On Oct 1, 2021, Martin Marietta completed its largest acquisition of Lehigh Hanson, Inc.’s West Region business for $2.3 billion in cash, thereby propelling growth in California and Arizona.
The company’s priorities are focusing on value-enhancing acquisitions, prudent organic capital investment and consistent return of capital to shareholders while maintaining an investment-grade rating profile.
That said, higher diesel and raw material costs along with adverse weather raise concerns for MLM and other Zacks Building Products - Concrete and Aggregates industry players like Vulcan Materials Company (VMC - Free Report) , Summit Materials, Inc. (SUM - Free Report) and Cornerstone Building Brands, Inc. .
We believe that the recent move and improved pricing as well as disciplined cost management throughout the business will help it to mitigate these risks.
Zacks Rank
Martin Marietta currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A Brief Overview of the Above-Mentioned Stocks
Vulcan Materials Company: Vulcan’s focus on four strategic initiatives — Commercial Excellence, Operational Excellence, Strategic Sourcing, and Logistics Innovation — will enhance price performance as well as operating efficiencies. Vulcan has been generating higher earnings despite tepid revenues on the back of prudent cost-control efforts and increased pricing in aggregates. Its focus on a systematic inorganic strategy for expansion is adding to the positives.
VMC holds a Zacks Rank #3. It has gained 2.4% over the past year. The company’s 2022 earnings are expected to increase 26%.
Summit Materials: Migration activity amid the pandemic continues to favor rural and exurban markets. Additionally, the strong execution of its Elevate Summit strategy and higher average selling prices for aggregates have been aiding the company to drive growth. It remains focused on sustainable improvement via investments in greenfields and end markets that are underpinned by sturdy growth fundamentals.
Summit Materials has a Zacks Rank #2 (Buy). The company’s earnings estimates for 2022 are expected to grow 37.5%.
Cornerstone Building Brands: This Cary, NC-based company is gaining traction, courtesy of higher volume leverage on robust demand for residential products and benefits from cost-reduction initiatives. Although Cornerstone Building Brands has been experiencing supply chain disruptions, strong residential end markets have been helping it navigate through the situation. The company’s strong operational execution is positioning Cornerstone Building Brands for long-term profitable growth.
Cornerstone Building currently carries a Zacks Rank #3 and has gained 88.7% over the past year. The company’s 2022 earnings are expected to increase 39.3%.