Martin Marietta Materials (NYSE: MLM) reported Q4 EPS of $2.09, $0.10 worse than the analyst estimate of $2.19. Revenue for the quarter came in at $1.1 billion versus the consensus estimate of $1.03 billion.

• 2019 Shipments and Pricing Improved for Aggregates, Cement and Asphalt
• Full-Year Consolidated Gross Margin Expanded 210 Basis Points
• 2020 Outlook Reflects Continuing Steady Growth in Aggregates Shipments and Pricing

Ward Nye, Chairman, President and CEO of Martin Marietta, stated, “We are pleased to have concluded 2019 as the most profitable year in our Company’s history. Driven by improved shipments, pricing and profitability across the vast majority of our Building Materials business, we achieved our eighth consecutive year of growth for revenues, gross profit, adjusted EBITDA and earnings per diluted share (after adjusting for the one-time earnings per diluted share benefit in 2017 from the Tax Cuts and Jobs Act of 2017). This year’s record-setting results, combined with our team’s shared commitment to safety and operational excellence, yielded a 64 percent total shareholder return. Building on this momentum and our more than 25-year history as a public company, Martin Marietta is well-positioned for responsible long-term growth and further shareholder value creation in 2020 and beyond.

“Looking ahead, our 2020 outlook remains positive across our three primary construction end-use markets. We believe construction growth in Martin Marietta’s top ten states will continue to outpace national averages and serves to reinforce our positive pricing outlook. Further supported by attractive market fundamentals and demand trends across our geographic footprint, as well as region-specific third-party forecasts, we expect the current construction cycle to expand at a steady and sustainable pace. Specifically, we anticipate infrastructure shipments, particularly for aggregates-intensive highways and streets, to meaningfully benefit from lettings and contract awards in our key states, strong federal and state funding levels and proposed regulatory reform. We are confident that states have the necessary visibility and resources to advance planned and future construction projects, regardless of a successor infrastructure bill passing prior to the September 2020 expiration of the Fixing America’s Surface Transportation Act (FAST Act). Furthermore, the Council on Environmental Quality recently proposed recommendations that, if approved, will reduce the regulatory burden of permitting large highway and bridge projects.”

Mr. Nye concluded, “With enhanced levels of needed infrastructure activity on the horizon and a healthy private sector, we expect 2020 to be another record year for Martin Marietta. Our ability to repeatedly deliver industry-leading safety, financial and operational performance demonstrates the successful execution of our proven strategy and our steadfast dedication to the world-class attributes of our business – including, safety, ethics, cost discipline and operational excellence. Importantly, we continue to strengthen this foundation for long-term success through strategic geographic positioning, cost management, price discipline, sustainable practices and prudent capital allocation. We will continue adhering to our strategic priorities and look forward to extending our long track record of consistently delivering profitability growth and enhanced shareholder value.”

Full-Year 2020 Outlook

Martin Marietta is confident in its 2020 outlook and in its key supporting factors. The Company’s geographic footprint has attractive underlying market fundamentals, including notable employment gains, population growth and superior state fiscal health, that should promote steady and sustainable construction growth over the near- and medium-terms. Supported by region-specific third-party forecasts and underlying demand trends, Martin Marietta believes the current construction cycle will continue for the foreseeable future and expand at a steady pace in 2020 for each of its three primary construction end-use markets. Notably:

• Infrastructure construction, particularly for aggregates-intensive highways and streets, is expected to benefit from lettings and contract awards in key Martin Marietta states, continued FAST Act funding, and regulatory reform allowing for reduced permitting time for large projects. Management believes that federal transportation funding will remain, at a minimum, at status quo levels absent the prospective passage of a successor infrastructure bill prior to the FAST Act’s September 2020 expiration. This should provide the necessary confidence and visibility for states to continue to advance planned and future construction projects. Importantly, states will continue to play an expanded role in infrastructure investment. Incremental funding at both state and local levels, through bond issuances, toll roads, tax initiatives and other sources, should grow at faster near-term rates than federal funding. Martin Marietta’s top ten states – Texas, Colorado, North Carolina, Georgia, Iowa, Florida, South Carolina, Indiana, Maryland and Nebraska – accounted for 86 percent of total Building Materials’ revenues in 2019 and have all introduced incremental transportation funding measures within the last five years. Third-party forecasts also predict increased infrastructure investment in 2020 and beyond.
• Nonresidential construction is expected to increase in both the commercial and heavy industrial sectors for the next several years across many of the Company’s key markets. The national Architectural Billings and Dodge Momentum Indices have both rebounded from 2019 fluctuations and suggest healthy activity in Martin Marietta markets. Further, management believes continued employment and population growth will drive increased levels of commercial construction activity, particularly in the Company’s southeastern and southwestern states. Continued federal regulatory approvals should contribute to increased heavy building materials consumption from the next wave of large energy-sector projects, particularly along the Gulf Coast of Texas. Construction activity for these projects is expected to continue for several years.
• Residential construction is expected to continue growing within Martin Marietta’s geographic footprint, particularly as mortgage rates remain attractive and contractors address the need for more affordable homes. The Company’s leading positions in southeastern and southwestern states offer superior opportunities, such as available land, an overall business-friendly environment and fewer regulatory barriers, for gains in both single-family and multi-family housing. The Company believes that permits represent the best indicator of future housing construction. Permit growth for single-family and multi-family housing units remains healthy in Martin Marietta’s top ten states. Continued strength in residential construction supports future infrastructure and nonresidential activity.

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