Martin Marietta Supplies, Inc. (NYSE:MLM) Q1 2024 Earnings Name Transcript April 30, 2024
Martin Marietta Supplies, Inc. beats earnings expectations. Reported EPS is $16.87, expectations have been $1.88. Martin Marietta Supplies, Inc. isn’t one of many 30 hottest shares amongst hedge funds on the finish of the third quarter (see the main points right here).
Operator: Welcome to Martin Marietta’s First Quarter 2024 Earnings Name. All contributors are actually in a listen-only mode. A matter-and-answer session will observe the corporate’s ready remarks. As a reminder, at the moment’s name is being recorded and might be obtainable for replay on the Firm’s web site. I’ll now flip the decision over to your host, Ms. Jacklyn Rooker, Martin Marietta’s Director of Investor Relations. Jacklyn, it’s possible you’ll start.
Jacklyn Rooker: Good morning, and thanks for becoming a member of Martin Marietta’s first quarter 2024 earnings name. With me at the moment are Howard Nye, Chair and Chief Govt Officer; and Jim Nickolas, Govt Vice President and Chief Monetary Officer. At the moment’s dialogue could embrace forward-looking statements as outlined by United States Securities Legal guidelines in reference to future occasions, future working outcomes or monetary efficiency. Like different companies, Martin Marietta is topic to dangers and uncertainties that would trigger precise outcomes to vary materially. We undertake no obligation, besides as legally required to publicly replace or revise any forward-looking statements, whether or not ensuing from new info, future developments, or in any other case.
Please seek advice from the authorized disclaimers contained in at the moment’s earnings launch and different public filings, which can be found on each our personal and the Securities and Alternate Fee’s web sites. We now have made obtainable throughout this webcast and on the Traders part of our web site, supplemental info that summarizes our monetary outcomes and tendencies. As a reminder, all monetary and working outcomes mentioned at the moment are for persevering with operations. As well as, non-GAAP measures are outlined and reconciled to probably the most straight comparable GAAP measure within the appendix to the supplemental info in addition to our filings with the SEC and are additionally obtainable on our web site. Howard Nye will start at the moment’s earnings name with a dialogue of our first quarter working efficiency and our just lately accomplished transactions, in addition to market tendencies.
Jim Nickolas will then assessment our monetary outcomes and capital allocation, after which Howard will present some transient concluding remarks. A matter-and-answer session will observe. Please restrict your Q&A participation to at least one query. I’ll now flip the decision over to Howard.
Howard Nye: Thanks, Jacklyn, and welcome, everybody, and thanks for becoming a member of at the moment’s teleconference. Martin Marietta’s continued progress and outcomes display our industry-leading efficiency and disciplined adherence to, and execution of, our confirmed Strategic Working Evaluation and Evaluate or SOAR plan. With the native that as all the time, the {industry}’s first quarter concluded and the 2024 building season meaningfully underway, we stay assured that regular product demand supporting favorable industrial dynamics, continued adherence to our price over quantity technique, ongoing operational excellence undertakings, and portfolio optimizing transactions will place Martin Marietta for continued outperformance in 2024 and past.
As detailed in at the moment’s earnings launch, we raised our full-year 2024 adjusted EBITDA steering to a variety to $2.30 billion to $2.44 billion or $2.37 billion on the mid-point. This improve displays the advantages that might be realized from the just lately acquired Blue Water operations in addition to the robust realization of this 12 months’s pricing actions. As is customary, we’ll revisit our steering once more at mid-year. Per our SOAR 2025 initiatives, we have executed $4.5 billion of portfolio-enhancing transactions this 12 months, lowering cyclical downstream publicity, whereas redeploying the proceeds to develop our aggregates footprint and enhance our skill to generate persistently larger margins. Extra particularly, on January 12, we accomplished the acquisition of Albert Frei & Sons, a number one aggregates producer in Colorado, strengthening our aggregates platform within the high-growth Denver Metropolitan Space.
And on April 5, we acquired 20 mixture operations from Blue Water Industries, offering us a brand new progress platform in Tennessee and Florida. These two pure-play aggregates transactions are anticipated so as to add roughly 17 million tons of annual shipments and generate roughly $180 million of annualized EBITDA, greater than offsetting the EBITDA from the February ninth divestiture of the corporate’s South Texas cement and associated concrete enterprise. These transactions are all mirrored in our revised adjusted EBITDA steering as of their respective time limits. Turning now to the corporate’s first-quarter working efficiency, mixture’s pricing fundamentals stay enticing, growing 12.2% or 12.7% on an natural mix-adjusted foundation, underscoring the benefits of our value-over-volume industrial technique and our gross sales workforce’s unwavering dedication to receiving acceptable industrial consideration for our beneficial and long-lived reserves.
Mixture shipments declined 12.3% due largely to the well-chronicled weather-impacted begin to the 12 months in our East and Southwest divisions, and softening demand in warehouse, workplace, and retail building, partially offset by extra favorable climate and relative power in our Central and West divisions. Aggregates product line gross revenue per ton elevated 14% and gross margin expanded by 90 foundation factors, however the cargo decline. Wanting forward, we stay captivated with Martin Marietta’s enticing market fundamentals and long-term secular tendencies throughout our three main finish makes use of of public works, non-residential, and residential building. Extra particularly, we consider these markets in Martin Marietta’s chosen geographies will drive aggregate-intensive progress and favorable pricing tendencies for the foreseeable future.
We count on strong multi-year demand in public infrastructure, US-based manufacturing, power initiatives, and knowledge middle building will partially offset near-term softness in warehouse, mild non-residential, and residential end-markets. That mentioned, we absolutely count on the housing restoration, significantly in single-family as soon as affordability challenges subside as demand in our key markets stays strong. Infrastructure exercise is anticipated to proceed to develop in 2024 as early Infrastructure Funding and Jobs Act or IIJA initiatives advance to the main building section. Notably, based on the annual market outlook offered by the American Street and Transportation Builders Affiliation or ARTBA, public freeway, pavement, and avenue building, the biggest market sector is anticipated to extend 16% to $126 billion in 2024, as in contrast with $109 billion in 2023, as report State Division of Transportation or DOT budgets match federal funds and supply further investments.
The worth of state and native authorities freeway, bridge, and tunnel contract award is a number one indicator for our future product demand grew 11% to $116 billion for the 12-month-period ending February 29, 2024. This generational funding in our nation’s infrastructure supported by federal, state, and native actions offers State DOTs with certainty to advance initiatives of their backlogs, driving sustained multi-year demand on this aggregates-intensive, typically countercyclical market. Shifting to the heavy non-residential market, manufacturing initiatives proceed to be supported by regular demand from ongoing reshoring of essential product provide chains. Building spending for home manufacturing continues to pattern positively with the February seasoning adjusted annual charge of spending for 2024 at $223 billion, a 32% improve from the February 2023 worth of $169 billion.
Equally, we count on the long-term secular tendencies towards cloud-based providers and synthetic intelligence will drive renewed progress in knowledge middle building, which had moderated from its post-COVID peak. For instance, in March, Google introduced a brand new $1 billion knowledge middle in Kansas Metropolis to assist drive its synthetic intelligence efforts, which requires almost 800,000 tons of aggregates from our uniquely positioned underground operations. Wanting on the mild non-residential market, we count on 2024 demand might be challenged given larger for longer rates of interest, excessive workplace emptiness charges, and the pure building lag from the final two years of single-family residential declines. As for the residential market, regardless of near-term uncertainty round mortgage charges, we’re inspired by optimistic tendencies in single-family housing begins, a number one indicator of aggregates demand, which have been at 1 million models in March 2024, an almost 21% improve from a 12 months in the past.
Notably, single-family housing begins have been at or above 1 million models since November 2023, indicative of a restoration from the 2023 trough. Given the well-publicized structural housing deficit in our firm’s key metropolitan areas, we count on Martin Marietta to learn disproportionately from new house building as soon as rates of interest average and month-to-month mortgage funds grow to be extra inexpensive. I’ll now flip the decision over to Jim to debate our first-quarter monetary outcomes. Jim?
Jim Nickolas: Thanks, Howard, and good morning, everybody. As Howard talked about and indicated in our earnings launch, we raised our full-year 2024 adjusted EBITDA steering to $2.37 billion on the mid-point and our full-year 2024 aggregates gross revenue steering to $1.75 billion on the mid-point. The up to date steering for aggregates gross revenue features a $30 million non-recurring, non-cash buy accounting influence anticipated within the second quarter for the honest market worth write-up of stock associated to the Blue Water acquisition. The Constructing Supplies enterprise generated revenues of $1.2 billion, a lower of 8%, and gross revenue of $248 million, a lower of 10%. The overwhelming majority of the decline in each metrics is because of the impact of the divestiture of our South Texas cement and ready-mix enterprise.
A a lot smaller portion of the decline was attributable to shipments impacted by harder climate this quarter in comparison with the prior 12 months’s unseasonably favorable climate situations. Regardless of the decrease cargo volumes, aggregates gross revenue elevated modestly to $239 million and gross margin elevated 90 foundation factors to 27%. These outcomes mirror our workforce’s concentrate on what we are able to management, particularly the efficacy of our industrial self-discipline and versatile price construction, which drives larger earnings with out the good thing about rising volumes. Turning to our Texas Cement and focused downstream companies. Our cement and concrete revenues decreased 22% to $265 million and gross revenue decreased 47% to $31 million, pushed primarily by the divestiture of our South Texas cement plant and its associated concrete operations and secondarily by moist climate in Texas.
Moreover, the brand new end mill at our Midlothian cement plant in North Texas, which is able to add roughly 450,000 tons of incremental high-margin annual manufacturing capability remains to be on observe to be operational within the third quarter of 2024. Per typical seasonal tendencies in related geographies, the asphalt and paving enterprise posted a $22 million gross loss as our Minnesota-based asphalt services are inactive throughout the first quarter attributable to winter operational shutdowns and our Colorado-based operations skilled unfavorable winter situations. Magnesia Specialties achieved an all-time quarterly gross revenue report of $29 million, regardless of a 3% lower in revenues to $81 million, as robust pricing, improved upkeep price management, and power tailwinds greater than offset continued headwinds in steel mining finish markets.
Our long-standing disciplined capital allocation priorities stay targeted on responsibly rising our enterprise by means of value-enhancing acquisitions, prudent natural capital funding, and the constant return of capital to shareholders, all whereas sustaining our investment-grade credit standing profile. Within the first quarter, we invested $200 million of capital into our enterprise. We additionally returned to shareholders virtually $200 million throughout the quarter with $150 million of that used to repurchase over 255,000 shares at a median value of $586.85. Since our repurchase authorization announcement in February 2015, we now have returned a complete of $2.8 billion to shareholders by means of each dividends and share repurchases. Our internet debt-to-EBITDA ratio was 0.8 occasions as of March 31.
Assuming no additional M&A exercise, we count on internet leverage to be 1.4 occasions by year-end under our focused vary of two.0 occasions to 2.5 occasions, offering a powerful steadiness sheet to capitalize on our strong acquisition pipeline. With that, I’ll flip the decision again over to Howard.
Howard Nye: Jim, thanks a lot. To conclude, we count on 2024 might be one other 12 months of great achievement for Martin Marietta. We’re well-positioned to learn from infrastructure tailwinds, offering regular product demand and favorable industrial dynamics throughout our coast-to-coast footprint. Over the previous 30 years, years as a public firm, Martin Marietta has constructed a resilient and sturdy enterprise. We’ll proceed to construct on the muse that has confirmed so profitable, an aggregates-led platform with an unwavering dedication to security, industrial, and operational excellence, and the disciplined execution of our strategic priorities. The operator will now present the required directions, we’ll flip our consideration to addressing your questions.
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