Martin Marietta Materials (MLM) Misses Q3 EPS by 10c

Martin Marietta Materials (NYSE: MLM) reported Q3 EPS of $2.04, $0.10 worse than the analyst estimate of $2.14. Revenue for the quarter came in at $1 billion versus the consensus estimate of $1.06 billion.

FULL-YEAR 2015 OUTLOOK

The Company is encouraged by positive trends in its business and markets, notably:

• Nonresidential construction is expected to increase in both the heavy industrial and commercial sectors. The Dodge Momentum Index remains high and signals continued growth.
• Energy-related economic activity, including follow-on public and private construction activities in the Company’s primary markets, is anticipated to remain strong.
• Residential construction is expected to continue to grow, driven by historically low levels of construction activity over the previous several years, employment gains, low mortgage rates, significant lot absorption, higher multi-family rental rates and rising housing prices.
• For the public sector, authorized highway funding from MAP-21 should remain stable compared with 2014. Additionally, state initiatives to finance infrastructure projects, including support from TIFIA, are expected to grow and continue to play an expanded role in public-sector activity.

Based on these external trends, the Company anticipates the following for the full year:

• Aggregates end-use markets compared to 2014 levels are as follows:
  • Infrastructure market to increase in the low-single digits.
  • Nonresidential market to increase in the mid-single digits.
  • Residential market to experience a double-digit increase.
  • ChemRock/Rail market to remain relatively flat.
• Aggregates product line shipments to increase by 7 to 10 percent compared with 2014 levels.
  • Heritage aggregates shipments to increase 3 to 5 percent
• Aggregates product line pricing to increase by 7 to 9 percent compared with 2014.
• Aggregates product line production cost per ton shipped to remain relatively flat.
• Aggregates-related downstream product lines to generate between $875 million and $925 million of net sales and $80 million to $85 million of gross profit.
• Net sales for the Cement segment to be between $375 million and $400 million, generating $105 million to $110 million of gross profit.
• Net sales for the Magnesia Specialties segment to be between $235 million and $240 million, generating $80 million to $85 million of gross profit.
• SG&A expenses as a percentage of net sales to be slightly above 6.0 percent, inclusive of an $18 million increase in heritage pension costs that resulted from a lower discount rate.
• Interest expense to approximate $75 million to $80 million.
• Estimated effective income tax rate to approximate 31 percent, excluding discrete events.
• Consolidated EBITDA to range from $800 million to $820 million, exclusive of the loss on the California cement sale and related expenses and absent the early onset of winter weather in the Company’s markets.
• Capital expenditures to approximate $330 million to $350 million, including $35 million of synergy-related capital and approximately $80 million for the Medina limestone quarry.

The Company has started framing a preliminary 2016 outlook for its aggregates end-use markets based on its internal observations in conjunction with McGraw Hill Construction’s economic forecast. The Company currently expects the following:

• Infrastructure market to increase slightly.
• Nonresidential market to increase slightly.
• Residential market to experience a double-digit increase.
• ChemRock/Rail market to remain relatively flat.

While the Company is optimistic regarding the passage of a multi-year highway bill, the preliminary 2016 outlook excludes any resulting increase in infrastructure construction activity.

The Company’s outlook for the cement industry is largely consistent with PCA’s forecast. Cement demand in Texas is forecasted to be up 4 percent in 2016.

Mr. Nye concluded, “As we begin to conclude 2015, we are encouraged by how well we performed, especially in light of the significant task of integrating TXI into Martin Marietta. It is a testimonial to our people and our processes that the integration went as smoothly as it did. Importantly, I look no further than the 50 percent improvement in the safety record of the acquired businesses, as evidence of integrating the cultures of our combined company. More importantly, with the effort substantially behind us, and the positive economic environment in our geographies, we are excited about our outlook for 2016 and beyond. Our leading position in the overwhelming majority of our markets should provide us with continued opportunities to increase profitability. We remain committed to executing our strategic plan, investing in the growth of our business and returning capital through share repurchases, all with the view towards increasing shareholder value.”

For earnings history and earnings-related data on Martin Marietta Materials (MLM) click here.

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