It has been about a month since the last earnings report for Martin Marietta (MLM Quick QuoteMLM - Free Report) . Shares have added about 5.4% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Martin Marietta due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Martin Marietta’s Q3 Earnings Beat, Revenues Lag, View Up

Martin Marietta Materials reported mixed third-quarter 2023 results, wherein earnings surpassed the Zacks Consensus Estimate and increased on a year-over-year basis. On the other hand, revenues missed the consensus mark but rose year over year.

The company’s results reflect gains from increased investment in large infrastructure and manufacturing projects, the business-mix portfolio, its discreetly curated coast-to-coast footprint and its prime focus on value-over-volume commercial strategy. Owing to these tailwinds, Martin Marietta expects a significant boost in aggregate demand in the U.S. economy in the remainder of 2023. However, a slowdown in warehouses, along with softness in private nonresidential and residential construction activities considering the ongoing economic uncertainties, partially offset the abovementioned positives.

Abiding by its aggregates-led product focus strategy, Martin Marietta divested its Tehachapi, California cement plant for $315 million on Oct 31, 2023. This will enhance its product mix and encourage it to proceed with more pure-play aggregates acquisitions.

Given the improving trends, the company is optimistic that the demand in its end markets is likely to accelerate upon the moderation of inflation and restrictive monetary policy. Moreover, owing to the tailwinds, the company also lifted its full-year adjusted EBITDA and net earnings from continuing operations expectations.

Inside the Headlines

Martin Marietta reported earnings from continuing operations of $6.94 per share, which notably surpassed the Zacks Consensus Estimate of earnings of $5.93 per share by 17%. Also, the metric increased 48% from the year-ago quarter’s adjusted earnings level of $4.69 per share.

Quarterly revenues of $1.99 billion missed the consensus mark of $2 billion by 0.5%. However, the metric grew 10.1% from the year-ago period.

Segmental Discussion

Building Materials (including aggregates, cement, ready-mixed concrete, asphalt, paving product lines and Freight) reported third-quarter revenues of $1.9 billion, which increased 10.5% year over year. For this segment’s revenues, our model predicted a value of $1.89 billion. The segment’s gross margin improved by 680 basis points (bps) to 33.8% year over year backed by favorable pricing.

Within the Building Materials’ product and services umbrella, Aggregates’ revenues rose 8% to $1.22 billion from the year-ago quarter. Cement revenues rose 18.4% year over year to $199.1 million. Ready Mixed Concrete’s revenues grew 25.3% year over year to $285.2 million. Revenues in Asphalt and Paving product lines increased 14.6% from the year-ago quarter to $359.9 million.

In the reporting quarter, Aggregates shipments fell 7.3% year over year due to soft demand in a few Midwest and Southwest markets. However, pricing advanced 20%. Aggregates gross profit in the quarter increased 32.1% to a record value of $440.6 million year over year.

Cement shipments were on par with the prior-year quarter while pricing increased 18.9% year over year. The Cement gross profit grew 61.5% in the quarter from a year ago.

Within the Downstream business, ready mixed concrete shipments increased 4% and Asphalt shipments grew 6% in the quarter.

Magnesia Specialties reported revenues of $75.5 million, flat year over year. We predicted a comparatively higher value of $97 million year over year compared with the reported figure. Nonetheless, the gross profit margin increased 110 bps to 28.3% on the back of higher pricing and a moderation of energy expenses.

Operating Highlights

The gross profit increased 38.6% year over year to $676 million. The adjusted gross margin was 33.9%, which notably increased 700 bps year over year. Adjusted EBITDA of $705.2 million increased 32.3% year over year.

Liquidity and Cash Flow

As of Sep 30, 2023, Martin Marietta had unrestricted cash and cash equivalents of $647.6 million compared with $358 million at 2022 end. Also, it had $1.20 billion of unused borrowing capacity on its existing credit facilities in September-end. Long-term debt (excluding current maturities) was $3.94 billion, down from $4.34 billion as of 2022 end.

Net cash provided by operations was $972.5 million for the first nine months, up from $560.7 million reported in the year-ago period.

Updated 2023 Guidance

Martin Marietta now expects consolidated products and services revenues to be $6,735-$6,855 million compared with $6,725-$6,860 million stated earlier. The company anticipates adjusted EBITDA to be between $2,050 million and $2,150 million, up from the prior-projected range of $2,000 million and $2,100 million.

Interest expenses are still likely to be in the range of $165-$170 million and the tax rate is projected to be 21-22%. Net earnings from continuing operations attributable to Martin Marietta are now anticipated to be in the range of $1,095-$1,195 million, up from the prior expectation of $1,040-$1,150 million. Capital expenditure is likely to be in the band of $575-$625 million.

Within the Building Materials business, total aggregate shipment growth is now expected to be between down 5% and down 4% compared with prior anticipation of down 5% and down 1%. Total aggregate pricing per ton is anticipated to grow 18-20%, up from the previously anticipated range of 17-19%. Gross profit is expected to be between $1,350 million and $1,410 million, up from $1,330 million and $1,395 million expected earlier.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

Currently, Martin Marietta has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Martin Marietta has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Martin Marietta belongs to the Zacks Building Products - Concrete and Aggregates industry. Another stock from the same industry, Vulcan Materials (VMC Quick QuoteVMC - Free Report) , has gained 3.3% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.

Vulcan reported revenues of $2.19 billion in the last reported quarter, representing a year-over-year change of +4.7%. EPS of $2.29 for the same period compares with $1.78 a year ago.

For the current quarter, Vulcan is expected to post earnings of $1.34 per share, indicating a change of +24.1% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.2% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Vulcan. Also, the stock has a VGM Score of B.