Martin Marietta Materials, Inc.
Analysis
Martin Marietta has remade itself from cement and concrete into a buyer of cheap quarries and now lime, and demand is finally cooperating — four straight quarters of volume growth. The bet is that it can reprice those purchases faster than costs rise. How much of Martin Marietta's profit will lime contribute after the Lhoist deal?
- Aggregates demand turned up and has stayed up.
Organic shipments have grown every quarter for a year, and management now expects the full year at the high end of its range. Infrastructure and heavy nonresidential work is doing all of it while housing contributes nothing.
- Reported pricing looks weak; the underlying business is not.
Quarries it bought sell stone for about half its average, so in management's words the 2% reported price decline "doesn't mean anything". Mix-adjusted pricing rose 3.7%, and lifting those tons to its own price is the growth plan. How much can acquired quarry prices rise before customers push back?
- Costs are swallowing this year's acquisition gains.
It raised revenue guidance but not profit guidance, because higher diesel and freight absorb the New Frontier contribution, about $50 million. Free cash flow turned negative and debt rose, so the deals are paid for before they pay off. How much of Martin Marietta's diesel cost is hedged or contracted?
- Cost cuts keep beating inflation on the tons it already sells. Every dollar taken out of a quarry drops straight to profit, which keeps earnings rising even when prices barely move.
- Midyear price rises land in the Quikrete and New Frontier markets. Those were bought at roughly half the company's price per ton, so raising them is where the profit growth comes from.
- Washington keeps road money flowing through the September deadline. Roads are the biggest, steadiest slice of volume, so a late bill costs little as long as the funding level holds.
- Diesel and freight keep outrunning the price increases. Extra fuel costs eat the whole contribution from New Frontier, so added tons bring work without added profit.
- Housing stays frozen and light commercial follows it down. Those customers aren't buying now, so the pricing that covers costs has to come from a shorter list of funded projects.
- The Lhoist lime deal adds debt before it adds earnings. Until that debt comes down there is less spare cash for more quarry purchases and for returning money to shareholders.
| Politician | Transaction | Amount | Traded | Filed |
|---|---|---|---|---|
Donald Trump Republican · Executive | Sale | ≥$1K | Aug 24 | Oct 8 |
Donald Trump Republican · Executive | Purchase | ≥$1K | Jul 24 | Sep 22 |
Donald Trump Republican · Executive | Sale | ≥$15K | Jun 12 | Aug 22 |
Donald Trump Republican · Executive | Sale | ≥$1.0M | May 12 | Jul 1 |
Donald Trump Republican · Executive | Purchase | ≥$15K | Mar 23 | May 13 |
Congressional trading data provided by QuiverQuant
How Martin Marietta Materials turned $6.2B of revenue into $1.4B of operating income.
| Revenue | ||
|---|---|---|
| Aggregates | $5.0B | |
| Other Building Materials | $992.0M | |
| Specialties | $441.0M | |
| Total revenue | $6.2B | |
| Gross profit | $1.9B | 30.7% |
| Operating income | $1.4B | 23.4% |