Today’s news: Martin Marietta (MLM) reports fourth-quarter results. Quanta Services (PWR) moves from Hold to Buy. Reiterate Buy on Supernus Pharmaceuticals (SUPN).
Martin Marietta Materials (MLM – yield 1.0%) reported fourth-quarter results yesterday. Quarterly earnings per share of $1.50 fell short of the $1.74 consensus estimate. Revenue came in at $1.02 billion, exceeding all analysts’ estimates. The quarter’s profitability was impacted by extreme weather conditions in Texas and southeastern states. Highlights of the earnings press release include record full-year revenues, EBITDA and earnings per diluted share.
CEO Ward Nye commented, “Looking ahead, we expect 2019 to be another record year for Martin Marietta. We believe the combination of continued private-sector strength and the long-awaited arrival of increased public-sector activity in our key geographies will drive shipment, pricing and profitability growth in 2019.”
The tone of the conference call was ebullient. Business is booming in residential, non-residential and public projects. With reference to cash flow, Mr. Nye boasted on the conference call, “We’re going to have an embarrassment of riches problem.” CFO Jim Nickolas prioritized acquisitions and another attractive dividend increase, with the implication that last year’s 9% dividend increase could be repeated in 2019. He also expects to continue repurchasing stock and paying down debt.
The incorporation of the 2018 acquisition of Bluegrass Materials resulted in higher cost synergies than originally outlined by management, with Mr. Nye adding, “Bluegrass has done extraordinarily well. I think we are extraordinarily well positioned to continue to be a leader in industry consolidation.”
Martin Marietta Materials is a supplier of stone, sand, gravel, cement, concrete and asphalt. Recent consensus estimates point to 27% EPS growth in 2019. That number will be revised in the coming days as analysts factor in data from the earnings conference call. If the earnings growth rate, P/E and price chart all fall into line, I’ll give MLM a Buy recommendation. Conversely, a high P/E could cause me to retire the stock from the Growth Portfolio.
The share price fell a modest amount after the earnings release. MLM could easily trade anywhere between 175 and 198 in the coming weeks. Hold.
Quanta Services (PWR – yield 0.5%) – I expected PWR to rest longer in the wake of its January run-up, but the stock appears quite willing to rise again. I’m moving PWR from Hold to Buy. The fundamentals remain great. Buy.
Supernus Pharmaceuticals (SUPN) – To reiterate my comments from yesterday’s Weekly Update, SUPN appears ready to exceed its recent trading range between 36 and 38, in which case it could rise to 42. There’s additional price resistance at 50. Buy SUPN now. Strong Buy.