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Here's Why Investors Should Hold Martin Marietta (MLM) Stock
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Martin Marietta Materials, Inc. (MLM - Free Report) is benefiting from its strong aggregates pricing strategy, strength in public construction and accretive acquisitions. Also, the emphasis on long-term strategic plans — markedly SOAR (Strategic Operating Analysis and Review) 2025 initiatives bodes well. The expected improving infrastructure activity trend through 2024, thanks to a solid inflow of public funds for infrastructure and manufacturing activities, is encouraging.
However, soft aggregate shipments due to weather-related woes and pricing fluctuations are headwinds. Also, dependency on the timing and amount of federal and local funding for infrastructure work is a concern.
Shares of this leading supplier of construction aggregates in the United States have gained 32% in the past year compared with the Zacks Building Products - Concrete and Aggregates industry’s 22.8% growth.
The Zacks Rank #3 (Hold) company’s 2024 earnings and sales are likely to witness growth of 22.1% and 4.6% year over year, respectively. Earnings estimates for 2024 have increased 7.8% upward in the past 30 days. This positive trend signifies bullish analysts’ sentiments, indicating robust fundamentals and the expectation of outperformance in the near term.
Image Source: Zacks Investment Research
Let us discuss the factors highlighting why investors should retain the stock for now.
Growth Catalysts
Strong Pricing Strategy: Martin Marietta is poised to benefit from pricing improvements and growth initiatives. The Aggregates business anticipates increased sales and profits in the forthcoming quarters, supported by strong underlying demand. During first-quarter 2024, Aggregates’ shipment grew in the company’s Central and West divisions, thanks to favorable weather and demand strength. Gross profit also increased year over year on the back of pricing growth. The average selling price (ASP) increased 12.2% to $22.26 per ton due to the strong realization of Jan 1, 2024, pricing actions and a focus on a value-over-volume commercial strategy led to significant growth.
The company is optimistic about the aggregates-intensive, heavy, non-residential sector. The improving demand for single-family starts raises hope for the future. For 2024, Martin Marietta now expects total Aggregates pricing per ton to grow 11-13%, up from a prior expected range of 10-12%.
Robust Public Infrastructure Demand: The U.S. government’s focus on spurring massive infrastructure investments in roads, highways, ports and airports bodes well for aggregate producers like Martin Marietta. The recently enacted Infrastructure Investment and Jobs Act (IIJA) is the nation's most significant infrastructure action since the introduction of the Interstate Highway System in 1956. As of Feb 29, 2024, the value of state and local government highway, bridge, and tunnel contract awards grew 11% to $116 billion, up from $114 billion recorded as of Sep 30, 2023.
Martin Marietta expects infrastructure activity to grow in 2024 as early IIJA projects advance to the major construction phase. The company states that, per the American Road and Transportation Builders Association, public highway, pavement and street construction is expected to increase 16% to $126 billion in 2024 from $109 billion in 2023. Martin Marietta believes that its strategic coast-to-coast footprint is well-positioned for long-term growth, backed by favorable population migration trends, housing shortages in markets and a long-term federal highway bill complemented by healthy DOT budgets in its key states.
Focus on Acquisitions and Divestitures: In alignment with its SOAR 2025 initiatives, Martin Marietta has been involved in strategic acquisitions and divestitures to enhance its portfolio and productivity. It has ample flexibility to continue investing in the business and pursuing accretive acquisition opportunities in the future.
On Jan 12, 2024, the company wholly acquired Albert Frei & Sons, Inc., a leading aggregates producer in Colorado. The acquisition provides more than 60 years of high-quality, hard rock reserves to serve new and existing customers better. It also enhances MLM’s aggregates platform in the high-growth Denver metropolitan area. On Feb 11, 2024, the company entered into a definitive agreement to acquire 20 active aggregates operations in Alabama, South Carolina, South Florida, Tennessee and Virginia from affiliates of Blue Water Industries LLC for $2.05 billion in cash.
Coming to divestitures, on Feb 9, 2024, the company divested its South Texas cement business and certain of its related ready mixed concrete operations to CRH Americas Materials, Inc., a subsidiary of CRH plc, for $2.1 billion in cash.
Concerns
Weather Woes: Weather-related challenges in many markets are affecting Martin Marietta. In first-quarter 2024, aggregates shipments declined 12.3% year over year to 36.6 million tons, primarily due to a weather-impacted start to the year in the company's East and Southwest divisions along with softening demand in warehouse, office and retail construction.
Price Fluctuation: The company uses large amounts of electricity, diesel fuel, natural gas, coal, petroleum coke and other energy resources, subject to potential supply constraints and significant price fluctuation, which could affect operating results and profitability. The availability and pricing of these resources are subject to market forces. Variability in the supply and prices of these resources could affect the company’s operating costs and the rising costs could erode profitability.
Key Picks
Some better-ranked stocks in the Zacks Construction sector are:
The Zacks Consensus Estimate for HWM’s 2024 sales and EPS indicates a rise of 10.6% and 29.9%, respectively, from prior-year levels.
M-tron Industries, Inc. (MPTI - Free Report) currently carries a Zacks Rank #2 (Buy). It has topped earnings estimates in three of the trailing four quarters and missed once, with an average surprise of 26.7%.
The Zacks Consensus Estimate for MPTI’s 2024 sales and earnings per share (EPS) indicates a rise of 8.8% and 58.6%, respectively, from prior-year levels.
Gates Industrial Corporation plc (GTES - Free Report) presently carries a Zacks Rank #2. GTES has a trailing four-quarter earnings surprise of 14.9%, on average.
The Zacks Consensus Estimate for GTES’ 2024 sales indicates a 0.2% decline but EPS growth of 2.9% from the prior-year levels.
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Here's Why Investors Should Hold Martin Marietta (MLM) Stock
Martin Marietta Materials, Inc. (MLM - Free Report) is benefiting from its strong aggregates pricing strategy, strength in public construction and accretive acquisitions. Also, the emphasis on long-term strategic plans — markedly SOAR (Strategic Operating Analysis and Review) 2025 initiatives bodes well. The expected improving infrastructure activity trend through 2024, thanks to a solid inflow of public funds for infrastructure and manufacturing activities, is encouraging.
However, soft aggregate shipments due to weather-related woes and pricing fluctuations are headwinds. Also, dependency on the timing and amount of federal and local funding for infrastructure work is a concern.
Shares of this leading supplier of construction aggregates in the United States have gained 32% in the past year compared with the Zacks Building Products - Concrete and Aggregates industry’s 22.8% growth.
The Zacks Rank #3 (Hold) company’s 2024 earnings and sales are likely to witness growth of 22.1% and 4.6% year over year, respectively. Earnings estimates for 2024 have increased 7.8% upward in the past 30 days. This positive trend signifies bullish analysts’ sentiments, indicating robust fundamentals and the expectation of outperformance in the near term.
Image Source: Zacks Investment Research
Let us discuss the factors highlighting why investors should retain the stock for now.
Growth Catalysts
Strong Pricing Strategy: Martin Marietta is poised to benefit from pricing improvements and growth initiatives. The Aggregates business anticipates increased sales and profits in the forthcoming quarters, supported by strong underlying demand. During first-quarter 2024, Aggregates’ shipment grew in the company’s Central and West divisions, thanks to favorable weather and demand strength. Gross profit also increased year over year on the back of pricing growth. The average selling price (ASP) increased 12.2% to $22.26 per ton due to the strong realization of Jan 1, 2024, pricing actions and a focus on a value-over-volume commercial strategy led to significant growth.
The company is optimistic about the aggregates-intensive, heavy, non-residential sector. The improving demand for single-family starts raises hope for the future. For 2024, Martin Marietta now expects total Aggregates pricing per ton to grow 11-13%, up from a prior expected range of 10-12%.
Robust Public Infrastructure Demand: The U.S. government’s focus on spurring massive infrastructure investments in roads, highways, ports and airports bodes well for aggregate producers like Martin Marietta. The recently enacted Infrastructure Investment and Jobs Act (IIJA) is the nation's most significant infrastructure action since the introduction of the Interstate Highway System in 1956. As of Feb 29, 2024, the value of state and local government highway, bridge, and tunnel contract awards grew 11% to $116 billion, up from $114 billion recorded as of Sep 30, 2023.
Martin Marietta expects infrastructure activity to grow in 2024 as early IIJA projects advance to the major construction phase. The company states that, per the American Road and Transportation Builders Association, public highway, pavement and street construction is expected to increase 16% to $126 billion in 2024 from $109 billion in 2023. Martin Marietta believes that its strategic coast-to-coast footprint is well-positioned for long-term growth, backed by favorable population migration trends, housing shortages in markets and a long-term federal highway bill complemented by healthy DOT budgets in its key states.
Focus on Acquisitions and Divestitures: In alignment with its SOAR 2025 initiatives, Martin Marietta has been involved in strategic acquisitions and divestitures to enhance its portfolio and productivity. It has ample flexibility to continue investing in the business and pursuing accretive acquisition opportunities in the future.
On Jan 12, 2024, the company wholly acquired Albert Frei & Sons, Inc., a leading aggregates producer in Colorado. The acquisition provides more than 60 years of high-quality, hard rock reserves to serve new and existing customers better. It also enhances MLM’s aggregates platform in the high-growth Denver metropolitan area. On Feb 11, 2024, the company entered into a definitive agreement to acquire 20 active aggregates operations in Alabama, South Carolina, South Florida, Tennessee and Virginia from affiliates of Blue Water Industries LLC for $2.05 billion in cash.
Coming to divestitures, on Feb 9, 2024, the company divested its South Texas cement business and certain of its related ready mixed concrete operations to CRH Americas Materials, Inc., a subsidiary of CRH plc, for $2.1 billion in cash.
Concerns
Weather Woes: Weather-related challenges in many markets are affecting Martin Marietta. In first-quarter 2024, aggregates shipments declined 12.3% year over year to 36.6 million tons, primarily due to a weather-impacted start to the year in the company's East and Southwest divisions along with softening demand in warehouse, office and retail construction.
Price Fluctuation: The company uses large amounts of electricity, diesel fuel, natural gas, coal, petroleum coke and other energy resources, subject to potential supply constraints and significant price fluctuation, which could affect operating results and profitability. The availability and pricing of these resources are subject to market forces. Variability in the supply and prices of these resources could affect the company’s operating costs and the rising costs could erode profitability.
Key Picks
Some better-ranked stocks in the Zacks Construction sector are:
Howmet Aerospace Inc. (HWM - Free Report) carries a Zacks Rank #1 (Strong Buy). HWM has a trailing four-quarter earnings surprise of 8.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for HWM’s 2024 sales and EPS indicates a rise of 10.6% and 29.9%, respectively, from prior-year levels.
M-tron Industries, Inc. (MPTI - Free Report) currently carries a Zacks Rank #2 (Buy). It has topped earnings estimates in three of the trailing four quarters and missed once, with an average surprise of 26.7%.
The Zacks Consensus Estimate for MPTI’s 2024 sales and earnings per share (EPS) indicates a rise of 8.8% and 58.6%, respectively, from prior-year levels.
Gates Industrial Corporation plc (GTES - Free Report) presently carries a Zacks Rank #2. GTES has a trailing four-quarter earnings surprise of 14.9%, on average.
The Zacks Consensus Estimate for GTES’ 2024 sales indicates a 0.2% decline but EPS growth of 2.9% from the prior-year levels.