Martin Marietta (MLM) to Buy Lehigh West Region for $2.3B

Martin Marietta Materials, Inc. MLM intends to acquire Lehigh Hanson, Inc.’s West Region business (Lehigh West Region). This move is consistent with the company’s SOAR (Strategic Operating Analysis and Review) 2025 plan and will enhance its reach in new geographies for persistent industry-leading growth.

The acquisition, valued at $2.3 billion in cash, will add 17 active aggregates quarries, two cement plants with related distribution terminals and targeted downstream operations to its portfolio. Following the closure of the transaction, the Lehigh West Region will provide Martin Marietta with a new upstream materials-led growth platform across many major growing mega regions in California and Arizona.

Ward Nye, Chairman, President and CEO of Martin Marietta, said, “With this acquisition, our Company will be well-positioned to capitalize on long-term demand drivers from increased state infrastructure investment in California and Arizona as well as continued private-sector growth across these regions.”

Inorganic Moves Bode Well

Martin Marietta has been acquiring businesses to expand footprint and drive growth. On Apr 30, the company acquired Minnesota-based Tiller Corporation (“Tiller”), which will be integrated into the Central Division. Tiller is the leading aggregates and FOB hot mix asphalt supplier in the Minneapolis/St. Paul region. This strategic and value-enhancing acquisition will enhance Martin Marietta’s high-margin, upstream materials business in one of the largest as well as fastest growing mid-western metropolitan areas.

It expects this SOAR-aligned Tiller acquisition to be immediately accretive to earnings and cash flow as well as contribute $170 million of product revenues and $60 million of adjusted EBITDA in 2021.

In 2020, the company acquired certain assets, including a sand and gravel plant and four ready mixed concrete operations. This buyout has boosted customer expansion in the Dallas/Fort Worth, TX market, and its ability to internally source ready mixed concrete raw materials from the company’s legacy cement and aggregates operations.

Its priorities are focusing on value-enhancing acquisitions, prudent organic capital investment and consistent return of capital to shareholders while maintaining an investment-grade rating profile.

Shares of Martin Marietta have advanced 101.8% over the past year compared with the Zacks Building Products – Concrete and Aggregates industry’s 118.1% rally. That said, earnings estimates for the current year have been trending upward, increasing 9.1% over the past 30 days. This depicts analysts’ optimism over the company’s prospects.

Zacks Rank & Other Key Picks

Martin Marietta currently carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the same space include Cornerstone Building Brands, Inc. CNR, Eagle Materials Inc. EXP and U.S. Concrete, Inc. USCR.

Cornerstone, sporting a Zacks Rank #1 (Strong Buy), is expected to witness 337.5% growth in 2021 earnings. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings for the current year for Eagle Materials, a Zacks Rank #2 company, are expected to grow 19.1%.

Earnings for U.S. Concrete, also a Zacks Rank #2 company, are also expected to grow 20.2% this year.

Infrastructure Stock Boom to Sweep America

A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.

The only question is “Will you get into the right stocks early when their growth potential is greatest?”

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