Coinciding with the announced merger with Texas Industries, Martin Marietta released the company’s Q4 results that exceeded forecasts both on the revenue line and in earnings per share. For the quarter, revenue amounted to $545 million (est. $528 million) with earnings coming in at 77c (est. 70c). Volumes declined by .4% in the quarter as infrastructure demand was significantly negatively impacted while prices moved higher across business lines by 3.4%. <p>
Martin Marietta benefitted from strong residential demand (15% of aggregates shipments) which increased by 21% in the quarter, increased non-residential construction activity (33% of aggregates shipments), supported by energy company spending, which increased by 11% in Q4 while the Chemrock/Rail market (10% of aggregates shipments) saw volumes decrease by 12%. For the infrastructure end market (44% of aggregates shipments), making up the largest construction end market for Martin Marietta, volumes declined by 10% in Q4 as weather conditions led to lower activity in Texas coupled with the completion of several large projects across different states. <p>
In terms of outlook for 2014, Martin Marietta management are reiterating the guidance provided at their Q3 results which call for an increase in non-residential end market use by a mid-to-high single digit rate, a double-digit volume growth rate for residential end market shipments and for aggregates shipments to the infrastructure end market to increase at a low single-digit growth rate. <p>
It is worth noting that the US aggregates majors tend to be the most optimistic with regards to forward outlooks, particularly one year out in to the future. For example, in Martin Marietta’s Q4 results for 2012, the company forecast that aggregates volumes in 2013 would increase by between 4-6% and reiterated this view in the group’s Q1 results. In the company’s Q2 results, volume forecasts were revised to a volume growth rate of 1-3% for the year and were downgraded once again in Q3 to a guidance of flat to slightly up for the year. In actual fact, in 2013 for the year as a whole, volumes growth was flat, as reported yesterday so from the initial optimism suggesting a 4-6% improvement in volumes in 2013, the final result was for flat line growth. <p>
Overall, this is a solid earnings report by Martin Marietta a the company’s non-residential exposure buffered the company to a degree against the decline in infrastructure volumes. Martin Marietta has been a significant beneficiary of the move to shale gas and the required construction involved in the process which has support 33% of the group’s total aggregates volumes in addition to stronger residential demand. <p>
Of most importance to CRH will be the outlook concerning the infrastructure component which Martin Marietta are expecting volumes to be increasing at a slow single digit rate which we would agree with. We would also be more cautious with regards to demand for non-residential construction outside of the energy space as the ABI index has slowed recently. While residential demand will increase across the US during 2014, there will be large variances depending on the state with some of the harder hit sun states benefitting to a greater degree with regards to the rebound in activity levels.
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