Martin Marietta Materials Inc. (MLM) reported a challenging third quarter, with revenue declining by 5% to $1.889 billion, missing the consensus estimate of $1.934 billion. The company attributed the revenue shortfall to severe weather events that plagued its operations during the quarter. Significant rainfall in July, along with Tropical Storm Debby in North Carolina, Hurricane Beryl in Texas, and Hurricane Helene across the Southeast, significantly disrupted product shipments and impacted the company’s geographic mix.
Despite the temporary setbacks, Martin Marietta’s gross profit for the quarter reached $599 million, though this represented an 11% decrease from the previous year. The company’s building materials business revenue also declined by 6% to $1.8 billion, with a corresponding gross profit decrease of 9% to $588 million. While aggregate shipments decreased by 3.9% to 53.7 million tons, the average selling price rose by 7.7% (or 8.9% on an organic mix-adjusted basis) to $21.52 per ton. The company’s adjusted EBITDA for the quarter fell by 8% to $646 million, and earnings per share (EPS) dropped 15% to $5.91, missing the consensus estimate of $6.32.
Acknowledging the impact of the weather events, Martin Marietta revised its 2024 guidance. The company now expects revenue to fall between $6.450 billion and $6.705 billion, down from its prior forecast of $6.50 billion to $6.94 billion, and below the consensus estimate of $6.61 billion. The company also reduced its adjusted EBITDA guidance to $2.015 billion to $2.115 billion, compared to its previous forecast of $2.10 billion to $2.30 billion.
Despite the near-term challenges, Martin Marietta remains optimistic about the long-term outlook for the construction industry. CEO Ward Nye emphasized the positive impact of record levels of federal and state investments in infrastructure projects like highways, streets, and bridges. He also highlighted the potential for growth driven by reshoring initiatives and the expansion of artificial intelligence infrastructure, both of which are expected to create significant demand for aggregates in the coming years.
Nye expressed confidence in the company’s ability to navigate the current macroeconomic environment, citing recent actions by the Federal Reserve that are likely to support a recovery in the housing market and, subsequently, light non-residential construction activity. He also emphasized the company’s expectation for continued expansion of its aggregates price/cost spread, leading to improved unit profitability throughout the business cycle.
Investors seeking exposure to the construction sector can consider the TCW Transform Supply Chain ETF (SUPP) and the Invesco Building & Construction ETF (PKB) for potential investment opportunities. MLM shares were up 2.62% to $599.15 at the last check on Wednesday.
