Martin Marietta (MLM) to Post Q3 Earnings: What's in Store?

Martin Marietta Materials, Inc. MLM is scheduled to report third-quarter 2020 results on Oct 29, before the opening bell.

In the last reported quarter, the company’s earnings and revenues topped the Zacks Consensus Estimate by 14.8% and 3.6%, respectively. On a year-over-year basis, earnings of this aggregates producer grew 15.9% but revenues dropped marginally from a year ago.

Martin Marietta’s earnings topped the consensus mark in two of the last four quarters and missed on the other two occasions, with the average negative surprise being 0.8%.

Trend in Estimate Revision

The Zacks Consensus Estimate for third-quarter earnings is pegged at $3.76 per share, which suggests a 5.1% decrease from $3.96 reported in the year-ago period. Notably, earnings estimates for the quarter have decreased 0.5% over the past seven days. The consensus mark for revenues is pegged at $1.26 billion, which calls for a 4.6% decrease from the prior-year reported figure.

Let’s discuss the factors that are likely to reflect on the upcoming quarterly results.

Martin Marietta Materials, Inc. Price and EPS Surprise

Martin Marietta Materials, Inc. price-eps-surprise | Martin Marietta Materials, Inc. Quote

Factors to Note

Martin Marietta is expected to have generated lower year-over-year earnings and revenues in the third quarter. Although the company has seen minimal disruption from the COVID-19 pandemic through April 2020, softer demand resulting from businesses’ or the government’s budget shortfalls resulting from the COVID-19 pandemic may weigh on the results. Large non-residential projects are experiencing delays due to prevailing uncertainty owing to the COVID-19 outbreak.

Also, the company is likely to have faced difficult comparisons, after having posted solid organic volume growth in aggregates, cement and asphalt last year aided by storm repair. That said, solid residential construction (which accounted for 22% of 2019 aggregate shipments) in the third quarter is expected to have contributed to its top line.

Meanwhile, infrastructure, construction — particularly for aggregates intensive highways, roads and streets — is expected to have remained resilient in the quarter, as contractors advanced projects that have been awarded and funded.

Martin Marietta’s business and earnings are sensitive to changes in construction spending, particularly housing and public construction in Texas, Colorado, North Carolina, Georgia, Florida, and Iowa. Softer public spending in North Carolina is likely to have weighed on the company’s volumes in the quarter. Notably, North Carolina is Martin Marietta’s third-largest state in terms of revenues.

Overall, despite mixed volumes, pricing (strongest in aggregates) and a favorable cost environment (including lower diesel) are likely to have supported its margins. Although limited visibility in nonresidential construction may have been a concern, strong residential construction and healthier DOT spending than originally expected  are likely to have been positives.

Other Projections

The Zacks Consensus Estimate for the top line for the Building Material segment — accounting for 95% of total revenues — is pegged at $1,295 million, implying a 4.5% decline from a year ago.

The consensus estimate for Magnesia Specialties revenues is currently pegged at $64 million. This suggests a year-over-year decrease from $64.9 million.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Martin Marietta this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Earnings ESP: Martin Marietta has an Earnings ESP of +0.51%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: It currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks Worth a Look

Here are some other companies in the Zacks Construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.

Masco Corporation MAS has an Earnings ESP of +2.23% and holds a Zacks Rank #2.

Installed Building Products, Inc. IBP has an Earnings ESP of +2.12% and carries a Zacks Rank #2.

D.R. Horton, Inc. DHI has an Earnings ESP of +3.48% and carries a Zacks Rank #3.

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