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MARTIN MARIETTA MATERIALS INC 10-K Analysis & Summary – 2/21/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

MARTIN MARIETTA MATERIALS INC

Filing date:

02/21/2025

TLDR:

Martin Marietta’s 2024 performance shows strong earnings growth due to strategic divestitures, despite a slight revenue decrease. Investors should monitor debt levels and external risks.

ELI5:

Martin Marietta, a building materials company, made more profit this year because they sold a business, even though their overall sales were slightly down. They need to watch out for economic ups and downs and weather problems.

Accession #:

0000950170-25-024770

Published on

Analyst Summary

  • Revenues decreased slightly from $6.777 billion in 2023 to $6.536 billion in 2024.
  • Net earnings attributable to Martin Marietta increased significantly from $1.169 billion in 2023 to $1.995 billion in 2024, primarily due to a gain on the divestiture of the South Texas cement business.
  • Gross profit margin remained relatively stable at 29% in 2024 compared to 30% in 2023.
  • Total assets increased from $15.125 billion in 2023 to $18.170 billion in 2024, reflecting acquisitions.
  • Long-term debt increased from $3.946 billion to $5.288 billion.
  • Retained earnings increased from $4.563 billion to $5.915 billion.
  • Cash provided by operating activities remained relatively stable at $1.5 billion in both 2024 and 2023.
  • Net cash used for investing activities was $2.4 billion in 2024, primarily due to acquisitions.
  • Gross Profit Margin (2024): 28.7%
  • Operating Profit Margin (2024): 41.4%
  • Net Profit Margin (2024): 30.5%
  • Return on Assets (ROA): 11.0%
  • Return on Equity (ROE): 21.1%
  • Basic EPS: $32.50
  • Diluted EPS: $32.41
  • Current Ratio: 2.50
  • Quick Ratio: 1.40
  • Cash Ratio: 0.66
  • Debt-to-Equity Ratio: 0.92
  • Debt-to-Assets Ratio: 0.48
  • Interest Coverage Ratio: 16.0
  • Inventory Turnover: 4.43
  • Days Sales Outstanding (DSO): 37.9 days
  • Days Payable Outstanding (DPO): 29.4 days
  • Asset Turnover: 0.36
  • Price-to-Earnings Ratio (P/E): 15.1
  • Price-to-Book Ratio (P/B): 3.16
  • Price-to-Sales Ratio (P/S): 4.57
  • Enterprise Value to EBITDA (EV/EBITDA): 10.4
  • Revenue Growth: -3.6%
  • Net Income Growth: 70.7%
  • EPS Growth: 72.1%

Opportunities and Risks

  • Economic Cyclicality: The construction industry is cyclical, and economic downturns can significantly impact demand for Martin Marietta’s products.
  • Weather: Erratic weather patterns, including hurricanes, floods, and droughts, can disrupt production and shipments.
  • Regulatory Changes: Environmental regulations, including those related to climate change, could increase operating costs.
  • Competition: The building materials industry is highly competitive.
  • Cybersecurity: The company is dependent on information technology and faces cybersecurity risks.
  • Infrastructure Spending: The Infrastructure Investment and Jobs Act (IIJ Act) provides significant funding for infrastructure projects, increasing demand for aggregates and cement.
  • Strategic Acquisitions: Continued consolidation in the industry provides opportunities for strategic acquisitions.
  • Geographic Expansion: The company’s focus on high-growth regions positions it well for future growth.
  • Sustainability: Increasing demand for sustainable building solutions could benefit the company’s cement and concrete business.

Potential Implications

Company Performance

  • Monitor the impact of the IIJ Act on infrastructure spending and demand for Martin Marietta’s products.
  • Track the company’s progress in integrating acquired businesses and achieving synergies.
  • Assess the company’s ability to manage risks related to climate change and regulatory changes.
  • Evaluate the company’s debt levels and its ability to maintain financial flexibility.

Martin Marietta Materials Inc. (MLM) 2024 10-K Filing Analysis

Executive Summary

This report analyzes Martin Marietta Materials Inc.’s 2024 10-K filing. Key findings include a strong financial performance driven by strategic acquisitions and divestitures, offset by weather-related challenges and softer demand in some sectors. The company’s focus on aggregates and strategic geographic positioning appears sound. However, investors should monitor risks related to climate change, regulatory changes, and potential economic downturns. Overall, a cautiously optimistic outlook is warranted.

Company Overview

Martin Marietta Materials, Inc. is a leading supplier of aggregates and heavy building materials, operating primarily in the United States, Canada, and The Bahamas. The company operates through two reportable segments, organized by geography: East Group and West Group. The East Group provides aggregates and asphalt products. The West Group provides aggregates, cement, downstream products and paving services. The Company also operates a Magnesia Specialties business with production facilities in Michigan and Ohio. The company’s products are essential for infrastructure, nonresidential, and residential construction.

Detailed Analysis

Management’s Discussion and Analysis (MD&A)

Management highlights strategic objectives including geographic expansion, portfolio optimization, and a commitment to shareholder value. The MD&A emphasizes the importance of SOAR (Strategic Operating Analysis and Review) in guiding capital allocation and strategic decisions. Key acquisitions and divestitures in 2024 are discussed, including the sale of the South Texas cement business and the acquisition of Blue Water Industries LLC (BWI Southeast). Management acknowledges the cyclical nature of the construction industry and the impact of weather on operations.

Financial Statement Analysis

Income Statement

Revenues decreased slightly from $6.777 billion in 2023 to $6.536 billion in 2024. However, net earnings attributable to Martin Marietta increased significantly from $1.169 billion in 2023 to $1.995 billion in 2024, primarily due to a gain on the divestiture of the South Texas cement business. Gross profit margin remained relatively stable at 29% in 2024 compared to 30% in 2023.

Key Ratios:

  • Gross Profit Margin (2024): 29%
  • Net Profit Margin (2024): 31%

Balance Sheet

Total assets increased from $15.125 billion in 2023 to $18.170 billion in 2024, reflecting acquisitions. Goodwill increased from $3.389 billion to $3.767 billion. Long-term debt increased from $3.946 billion to $5.288 billion. Retained earnings increased from $4.563 billion to $5.915 billion.

Key Observations:

  • Increased debt levels due to acquisitions.
  • Strong retained earnings growth.

Cash Flow Statement

Cash provided by operating activities remained relatively stable at $1.5 billion in both 2024 and 2023. Net cash used for investing activities was $2.4 billion in 2024, primarily due to acquisitions, compared to net cash provided by investing activities of $459 million in 2023. Net cash provided by financing activities was $373 million in 2024, compared to net cash used for financing activities of $1.1 billion in 2023.

Key Observations:

  • Significant cash outflow for acquisitions.
  • Increased debt issuance to finance acquisitions.

Risk and Opportunity Assessment

Risks

  • Economic Cyclicality: The construction industry is cyclical, and economic downturns can significantly impact demand for Martin Marietta’s products.
  • Weather: Erratic weather patterns, including hurricanes, floods, and droughts, can disrupt production and shipments.
  • Regulatory Changes: Environmental regulations, including those related to climate change, could increase operating costs.
  • Competition: The building materials industry is highly competitive.
  • Cybersecurity: The company is dependent on information technology and faces cybersecurity risks.

Opportunities

  • Infrastructure Spending: The Infrastructure Investment and Jobs Act (IIJ Act) provides significant funding for infrastructure projects, increasing demand for aggregates and cement.
  • Strategic Acquisitions: Continued consolidation in the industry provides opportunities for strategic acquisitions.
  • Geographic Expansion: The company’s focus on high-growth regions positions it well for future growth.
  • Sustainability: Increasing demand for sustainable building solutions could benefit the company’s cement and concrete business.

Uncommon Metrics

  • Mix-Adjusted Average Selling Price: This non-GAAP metric provides a clearer picture of pricing trends by excluding the impact of product and geographic mix.
  • Aggregates Reserves: The company’s aggregates reserves average more than 85 years, providing a long-term competitive advantage.

Conclusion and Actionable Insights

Martin Marietta’s 2024 10-K reveals a company strategically positioned for long-term growth in the building materials industry. The company’s focus on aggregates, geographic expansion, and portfolio optimization appears sound. However, investors should carefully monitor risks related to economic cyclicality, weather, regulatory changes, and cybersecurity. The company’s increased debt levels due to acquisitions also warrant attention.

Overall Assessment: Hold

Recommendations:

  • Monitor the impact of the IIJ Act on infrastructure spending and demand for Martin Marietta’s products.
  • Track the company’s progress in integrating acquired businesses and achieving synergies.
  • Assess the company’s ability to manage risks related to climate change and regulatory changes.
  • Evaluate the company’s debt levels and its ability to maintain financial flexibility.

Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin:

    • Calculation: Gross Profit / Revenues = $1,878 / $6,536 = 28.7%
    • Trend: Previous year Gross Profit Margin = $2,023 / $6,777 = 29.8%. Percentage change = (28.7% – 29.8%) / 29.8% = -3.7%
    • Industry: The construction materials industry typically sees gross profit margins ranging from 25% to 35%. MLM’s current gross profit margin is within this range, but slightly below the previous year.
  • Operating Profit Margin:

    • Calculation: Earnings from Operations / Revenues = $2,707 / $6,536 = 41.4%
    • Trend: Previous year Operating Profit Margin = $1,596 / $6,777 = 23.5%. Percentage change = (41.4% – 23.5%) / 23.5% = 76.2%
    • Industry: A good operating margin for construction materials companies is generally between 15% and 25%. MLM’s operating margin is significantly higher than this range, indicating strong operational efficiency or a one-time gain.
  • Net Profit Margin:

    • Calculation: Net Earnings Attributable to Martin Marietta / Revenues = $1,995 / $6,536 = 30.5%
    • Trend: Previous year Net Profit Margin = $1,169 / $6,777 = 17.2%. Percentage change = (30.5% – 17.2%) / 17.2% = 77.3%
    • Industry: Net profit margins for construction materials companies typically range from 5% to 15%. MLM’s net profit margin is substantially higher, suggesting excellent profitability or the impact of non-operating items.
  • Return on Assets (ROA):

    • Calculation: Net Earnings Attributable to Martin Marietta / Total Assets = $1,995 / $18,170 = 11.0%
    • Trend: Previous year ROA = $1,169 / $15,125 = 7.7%. Percentage change = (11.0% – 7.7%) / 7.7% = 42.9%
    • Industry: The average ROA for companies in the construction materials sector is around 5%. MLM’s ROA is significantly higher, indicating efficient asset utilization.
  • Return on Equity (ROE):

    • Calculation: Net Earnings Attributable to Martin Marietta / Total Shareholders’ Equity = $1,995 / $9,453 = 21.1%
    • Trend: Previous year ROE = $1,169 / $8,034 = 14.6%. Percentage change = (21.1% – 14.6%) / 14.6% = 44.5%
    • Industry: A good ROE for construction materials companies is typically between 10% and 15%. MLM’s ROE is above this range, indicating effective use of equity to generate profits.
  • Earnings Per Share (EPS) – Basic and Diluted:

    • Basic EPS: $32.50
    • Diluted EPS: $32.41
    • Trend: Previous year Basic EPS = $18.88. Previous year Diluted EPS = $18.82. Basic EPS Percentage change = (32.50 – 18.88) / 18.88 = 72.1%. Diluted EPS Percentage change = (32.41 – 18.82) / 18.82 = 72.2%
    • Industry: EPS varies widely, but MLM’s EPS is high, reflecting strong profitability.

Liquidity

  • Current Ratio:

    • Calculation: Total Current Assets / Total Current Liabilities = $2,542 / $1,016 = 2.50
    • Trend: Previous year Current Ratio = $3,919 / $1,170 = 3.35. Percentage change = (2.50 – 3.35) / 3.35 = -25.4%
    • Industry: A current ratio between 1.5 and 2.0 is generally considered healthy. MLM’s current ratio is above this range, indicating strong liquidity, although it has decreased from the previous year.
  • Quick Ratio (Acid-Test Ratio):

    • Calculation: (Total Current Assets – Inventories) / Total Current Liabilities = ($2,542 – $1,115) / $1,016 = 1.40
    • Trend: Previous year Quick Ratio = ($3,919 – $989) / $1,170 = 2.50. Percentage change = (1.40 – 2.50) / 2.50 = -44.0%
    • Industry: A quick ratio of 1.0 or higher is generally considered acceptable. MLM’s quick ratio is above 1.0, indicating reasonable short-term liquidity, but it has decreased significantly from the previous year.
  • Cash Ratio:

    • Calculation: (Cash and Cash Equivalents) / Total Current Liabilities = $670 / $1,016 = 0.66
    • Trend: Previous year Cash Ratio = $1,272 / $1,170 = 1.09. Percentage change = (0.66 – 1.09) / 1.09 = -39.4%
    • Industry: A cash ratio of 0.5 or higher is often considered good. MLM’s cash ratio is above this level, but it has decreased from the previous year, indicating a lower proportion of cash to current liabilities.

Solvency/Leverage

  • Debt-to-Equity Ratio:

    • Calculation: Total Liabilities / Total Shareholders’ Equity = $8,714 / $9,453 = 0.92
    • Trend: Previous year Debt-to-Equity Ratio = $7,089 / $8,034 = 0.88. Percentage change = (0.92 – 0.88) / 0.88 = 4.5%
    • Industry: A debt-to-equity ratio of around 1.0 is typical. MLM’s ratio is slightly below this, indicating a balanced capital structure.
  • Debt-to-Assets Ratio:

    • Calculation: Total Liabilities / Total Assets = $8,714 / $18,170 = 0.48
    • Trend: Previous year Debt-to-Assets Ratio = $7,089 / $15,125 = 0.47. Percentage change = (0.48 – 0.47) / 0.47 = 2.1%
    • Industry: A debt-to-assets ratio below 0.5 is generally considered good. MLM’s ratio is below this level, indicating a relatively low level of debt compared to assets.
  • Interest Coverage Ratio (Times Interest Earned):

    • Calculation: Earnings from Operations / Interest Expense = $2,707 / $169 = 16.0
    • Trend: Previous year Interest Coverage Ratio = $1,596 / $165 = 9.7. Percentage change = (16.0 – 9.7) / 9.7 = 64.9%
    • Industry: An interest coverage ratio above 5.0 is generally considered strong. MLM’s ratio is very high, indicating a strong ability to cover interest expenses.

Activity/Efficiency

  • Inventory Turnover:

    • Calculation: Cost of Revenues / Average Inventory = $4,658 / (($1,115 + $989) / 2) = 4.43
    • Trend: Previous year Inventory Turnover = $4,754 / (($989 + $807) / 2) = 5.30. Percentage change = (4.43 – 5.30) / 5.30 = -16.4%
    • Industry: Inventory turnover varies, but MLM’s ratio suggests reasonable inventory management.
  • Days Sales Outstanding (DSO):

    • Calculation: (Accounts Receivable / Revenues) * 365 = ($678 / $6,536) * 365 = 37.9 days
    • Trend: Previous year DSO = ($753 / $6,777) * 365 = 40.5 days. Percentage change = (37.9 – 40.5) / 40.5 = -6.4%
    • Industry: DSO varies, but MLM’s DSO indicates a reasonable collection period.
  • Days Payable Outstanding (DPO):

    • Calculation: (Accounts Payable / Cost of Revenues) * 365 = ($375 / $4,658) * 365 = 29.4 days
    • Trend: Previous year DPO = ($343 / $4,754) * 365 = 26.4 days. Percentage change = (29.4 – 26.4) / 26.4 = 11.4%
    • Industry: DPO varies, but MLM’s DPO suggests a reasonable payment period.
  • Asset Turnover:

    • Calculation: Revenues / Total Assets = $6,536 / $18,170 = 0.36
    • Trend: Previous year Asset Turnover = $6,777 / $15,125 = 0.45. Percentage change = (0.36 – 0.45) / 0.45 = -20.0%
    • Industry: Asset turnover varies, but MLM’s ratio indicates moderate asset utilization.

Valuation

  • Price-to-Earnings Ratio (P/E):

    • Calculation: Stock Price / EPS = $489.84 / $32.50 = 15.1
    • Industry: The average P/E ratio for the construction materials industry is around 20. MLM’s P/E ratio is below the industry average, suggesting it may be undervalued relative to its earnings.
  • Price-to-Book Ratio (P/B):

    • Calculation: Market Cap / Total Shareholders’ Equity = (60,974,146 * $489.84) / $9,453,000,000 = 3.16
    • Industry: A P/B ratio between 1 and 3 is typical. MLM’s P/B ratio is within this range, suggesting reasonable valuation relative to its book value.
  • Price-to-Sales Ratio (P/S):

    • Calculation: Market Cap / Revenues = (60,974,146 * $489.84) / $6,536,000,000 = 4.57
    • Industry: A P/S ratio below 2 is often considered good. MLM’s P/S ratio is above this level, suggesting it may be overvalued relative to its sales.
  • Enterprise Value to EBITDA (EV/EBITDA):

    • Calculation: EV = Market Cap + Total Debt – Cash = (60,974,146 * $489.84) + $5,413,000,000 – $670,000,000 = $34,568,888,786
      EBITDA = Net Income + Interest + Taxes + Depreciation & Amortization = $1,995 + $169 + $600 + $573 = $3,337
      EV/EBITDA = $34,568,888,786 / $3,337,000,000 = 10.4
    • Industry: An EV/EBITDA ratio between 10 and 15 is typical. MLM’s EV/EBITDA ratio is within this range, suggesting reasonable valuation relative to its earnings before interest, taxes, depreciation, and amortization.

Growth Rates

  • Revenue Growth:

    • Calculation: ($6,536 – $6,777) / $6,777 = -3.6%
  • Net Income Growth:

    • Calculation: ($1,995 – $1,169) / $1,169 = 70.7%
  • EPS Growth:

    • Calculation: ($32.50 – $18.88) / $18.88 = 72.1%

Other Relevant Metrics

  • Consolidated Adjusted EBITDA: The company presents Consolidated Adjusted EBITDA as a non-GAAP metric. It is calculated by adding back interest expense, income tax expense, depreciation, depletion, and amortization expense, acquisition, divestiture and integration expenses, impact of selling acquired inventory after markup to fair value as part of acquisition accounting, and noncash asset and portfolio rationalization charge to net earnings from continuing operations attributable to Martin Marietta, and deducting nonrecurring gain on divestiture. This metric is used by management to evaluate the company’s operating performance. In 2024, Consolidated Adjusted EBITDA was $2,066 million, compared to $2,128 million in 2023. The decrease is primarily due to lower revenues and higher operating expenses. While EBITDA can be useful, investors should be aware that it excludes significant expenses like depreciation and interest, and can therefore present an overly optimistic view of profitability.

Commentary

Martin Marietta Materials demonstrated a mixed financial performance. While revenue decreased slightly, the company achieved substantial growth in net income and EPS, driven by a significant one-time gain on divestiture. Liquidity ratios, while still healthy, have decreased from the previous year. The company’s profitability metrics, such as operating and net profit margins, are significantly above industry averages, but this is largely due to the non-recurring gain. Overall, the company’s financial position remains strong, but investors should carefully consider the impact of non-recurring items when evaluating its long-term performance.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️