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Martin Marietta Materials: Medium-Term Compounding Potential Intact


  • Building on the success of prior iterations, Martin Marietta unveiled its 2025 SOAR plan at its latest investor day event.
  • With the company positioned to benefit from a construction-led upcycle and M&A-led growth, I expect upside surprises ahead.
  • Capacity expansion also remains on track and should prove accretive considering the favorable economics.
  • At the current relative discount to VMC, shares are reasonably priced.

Martin Marietta's (NYSE:MLM) latest investor day has changed my mind on the shares. As highlighted by management, there is a clear path to further value creation ahead through the continuation of its SOAR strategy (initially launched in 2010). Of note, the focus on expanding into growth markets through aggregates-led platform acquisitions and other bolt-ons, along with capacity expansion, entails plenty of earnings growth in the upcoming years. With valuations also reasonable relative to the growth potential and its peers, Martin Marietta appears to be positioned for relative outperformance.

Unveiling SOAR 2025

Following a very strong set of fiscal 2020 results and a demonstrated track record of success in recent years, Martin Marietta looks set for more of the same with its fiscal 2025 SOAR plan. Recall that the two previous SOARs have resulted in the market cap doubling in each five-year period, with the top line increasing c. 2.7x and EBITDA by c. 3.7x since the program started in fiscal 2010. The key difference this time around was the lack of formal longer-term financial goals, although with management informally targeting another doubling of the company's market cap by end-2025, there is no less ambition here.

Source: Martin Marietta Investor Day 2021 Presentation Slides

Nonetheless, the investor day event did focus on other key aspects like pricing, margin growth, and the focus on M&A to add to the cash generation. The pricing normalization opportunity, for instance, is massive - a convergence in aggregates pricing toward the company average and Southeast region pricing would result in a revenue expansion potential of c. $140 million and c. $700 million, respectively. Somewhat disappointingly, however, the discussion around margins was mainly on prior achievements, although management's new focus on the gross cash profit per ton metric was an interesting change from its usual quarterly reporting of gross margins.

This article was written by

Analyst with a keen interest in the global markets, always sifting through company filings in search of compelling opportunities. Approach is heavily centered on the notion that one needs to be non-consensus right in making investment decisions. A keen follower of value investing legends such as Peter Cundill, Seth Klarman, and more recently, Rupal Bhansali.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (5)

Jim Cramer have it a big big shout today lol
@Newuser456789 That worries me. Cramer is ALWAYS late to the party.
@mhargra34 I thought it was funny

Come back in six months and let’s test it out
Seems like a no brainer. Low rates + stimulus = construction activity goes UP.
MLM is going places. $1.9tn stimulus just got approved, infra is next!
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