Bear of the Day: Martin Marietta (MLM) - Bear of the Day
August 26 2013 - 4:52AM
Zacks
Weak results have led to
sharp downward estimates revisions, sending this construction
materials company to a Zacks Rank # 5 (Strong Sell).
About the Company
Headquartered in Raleigh,
North Carolina, Martin Marietta
Materials (MLM) is the country’s second largest producer
of construction aggregates, used primarily for construction of
roads, highways and other infrastructure projects and in the
domestic commercial and residential construction
industries.
The company operates
through approximately 300 quarries, distribution yards and plants
located in 28 states, Canada, the Bahamas and the Caribbean
Islands.
Disappointing Results
MLM reported its second
quarter FY 2013 results on July 30, 2013. Diluted EPS for the
quarter came in at $0.88 per share, down substantially from the
Zacks Consensus Estimate of $1.11 per share. The company said that
the results were affected by excessive rainfall in most of their
key markets-- particularly in the midwestern and
southeastern states.
According to company
estimates that the precipitation reduced shipment volumes between
1.5 million and 1.7 million tons, lowering net earnings by up
to $0.11 per diluted share in addition to significantly
affecting the operational productivity.
For the full-year, the
company anticipates aggregates product line shipments to increase
by 1% to 3%.
Downwards Revisions
Due to disappointing
results and uninspiring guidance, quarterly and annual estimates
have been revised sharply downwards in the past few weeks. Zacks
consensus estimates for the current quarter and year are now $1.47
and $2.55 per share respectively, down substantially from $1.60 and
$2.92 per share, 30 days ago.
The company has missed
estimates in three of the past four quarters, with an average
negative surprise of 23.9%.
The Bottom Line
MLM is currently Zacks
Rank # 5 (Strong Sell) stock and it has a longer-term
recommendation of “Underperform”. Further, uninspiring
guidance from the management regarding the volumes has resulted in
weak outlook for the stock for the time being.
Better Play?
Investors seeking
exposure to Construction industry could look at some of the
homebuilders instead of construction materials suppliers. Among the
Homebuilders—Meritage
Homes (MTH) beat
the Zacks Consensus Estimate for both revenues and earnings. This
Zacks Rank# 2 (Buy) stock saw increasing demand and pricing in most
housing markets during the recent quarter.
However, we may add that
rising mortgage rates seem to have started impacting the housing
market and as a result, estimates for homebuilders may come down
slightly if the trend continues.
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