Martin Marietta Materials, Inc. - Growth & Income
February 14 2012 - 7:00PM
Zacks
Estimates have been rising for
Martin Marietta Materials,
Inc. (MLM) after the company reported solid fourth quarter
results on February 7.
It is a Zacks #2 Rank (Buy) stock.
Based on consensus estimates, analysts project 26%
EPS growth this year and 40% growth next year. On top of this, the
company pays a dividend that yields 1.8%.
Company Description
Martin Marietta Materials, Inc. is the second
largest producer of construction aggregates in the United States
and a producer of magnesia-based chemical and dolomitic lime.
The company derives the majority of its revenue
from its Aggregates segment, which processes and sells granite,
limestone, and other products from a network of 283 quarries,
distribution facilities and plants to customers in North America.
These products are primarily used by commercial customers in the
domestic construction of highways and other infrastructure projects
and for non-residential and residential building development.
It is headquartered in Raleigh, North Carolina and
has a market cap of $4.0 billion.
Fourth Quarter Results
Martin reported solid fourth quarter results on
February 7. Total revenue rose 8% year-over-year to $421.1 million,
ahead of the Zacks Consensus Estimate of $378.0 million. A small
decline in volumes was more than offset by higher prices.
Revenue was mixed by geography. Growth was
strongest in the Mideast Group, which increased 11%. Sales in the
West Group were up 7%, while the Southeast Group saw a 1%
decline.
The gross profit margin declined 100 basis points
from the same quarter in 2010 to 16.6% of total revenue. But this
was more than offset by a decline in selling, general and
administrative expenses as a percentage of revenue - from 8.7% to
7.5%.
Earnings per share came in at 39 cents, in-line
with the Zacks Consensus Estimate.
Outlook
Despite Q4 EPS coming in-line, analysts revised
their estimates higher significantly higher for both 2012 and 2013,
sending the stock to a Zacks #2 Rank (Buy).
Based on consensus estimates, analysts expect
strong double-digit EPS growth over the next two years. The Zacks
Consensus Estimate for 2012 is $2.44, representing 26% EPS growth.
And the 2013 consensus estimate is 40% higher at $3.42.
Analysts expect a modest recovery in the
construction industry to drive increases in both pricing and
volumes. This should lead to strong top and bottom line growth over
the next two years.
Dividend
In addition to strong earnings growth, the company
pays a dividend that yields a solid 1.8%. The company has paid the
same 40 cent per share quarterly dividend since 2008.
Valuation
Shares of MLM have soared 17% year-to-date, leading
to higher valuations. The stock now trades at 34.5x 12-month
forward earnings, well ahead of its 10-year median of 18.5x, and a
premium to the industry median of 28.5x.
But its price to book ratio of 2.8 is much more
reasonable, and in-line with its historical median. Its price to
cash flow ratio is also a reasonable 15.8.
The Bottom Line
With rising earnings estimates, strong growth
projections, and a solid 1.8% dividend yield, Martin Marietta
Materials offers plenty to like.
Todd Bunton is the Growth & Income Stock
Strategist for Zacks Investment Research and Co-Editor of the
Reitmeister Value Investor.
MARTIN MRT-MATL (MLM): Free Stock Analysis Report
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