MLM Stock | Martin Marietta Materials, Inc. Q1 2026 Earnings Call

Thank you, Jacqueline. Good morning and thank you for joining today's teleconference. Before reviewing our first quarter results, I'll take a moment to discuss the leadership appointment we announced earlier this week. As you may have seen, Chris Samorski was appointed Martin Marietta's chief operating officer effective May 1st. Chris is a highly respected and proven leader who most recently served as president of our West and Specialties divisions. Under his leadership, both businesses delivered meaningful growth and strong operational execution. Since joining Martin Marietta in 2018, Chris has consistently made a significant and positive impact in every role he's held. His deep operational experience, disciplined leadership style, and strong commitment to our culture make him exceptionally well suited for this role. With Chris serving as COO, Kirk Light will assume leadership of our West and Specialties divisions while continuing in his role as president of our Southwest division. In addition, our East Division President Oliver Brooks, Central Division President Bill Boed, Vice President of Operational Excellence Ronnie Walker, and Vice President of Safety and Health Jessica Kosian will report directly to Chris. This appointment and enhanced leadership structure reflect the deep bench of talent across our divisions, districts, and functions, all focused on consistent execution, continuous improvement, and a shared commitment to our one culture. I'm pleased to welcome Chris to his new position, and I'm confident that as COO, he will continue to play a critical role in helping guide Martin Marietta to even greater success. With that, I'll now turn to the quarter. 2026 is off to a strong start with revenues increasing an impressive 17% to 1.4 billion, a new first quarter record. Organic aggregate shipments growth of 7.2% meaningfully exceeded our guidance, benefiting from an early start to the construction season in the Midwest and Colorado, as well as continued strength in infrastructure and heavy non-residential demand across our geographic footprint. As we look ahead, underlying fundamentals across the business remain favorable. Notably, the quarter's results reflect a 14% improvement in both adjusted EBITDA from continuing operations as well as adjusted earnings per diluted share from continuing operations. I'm especially pleased to report that our teams delivered the strongest first quarter safety performance in the company's history, as measured by both total and lost time incident rates. This achievement reflects the strength of our culture, unwavering commitment to world-class safety, and the operational discipline embedded throughout the organization. The quarter was also highlighted by the February 23rd closing of the Quikrete Asset Exchange, our largest aggregates acquisition to date. Importantly, this transaction accelerated our aggregates-led strategy by shifting the portfolio away from more cyclical cement and concrete assets, enhancing the quality and durability of our earnings profile while providing $450 million of cash to redeploy into aggregate acquisitions, accordingly and consistent with the company's SOAR 2030 strategic plan. On April 19, we entered into a definitive agreement to acquire New Frontier Materials, a complementary bolt-on to our central division that produces over 8 million tons of aggregates annually. This transaction is expected to close in the second half of the year, subject to regulatory approvals and other customary closing conditions. Looking ahead, our M&A pipeline remains active and is primarily focused on pure-play aggregates opportunities across attractive SOAR-aligned geographies. As highlighted in this morning's release, our core aggregates product line delivered record first quarter shipments of 43.9 million tons, a 12% increase, and record revenues of $1.1 billion, representing a 14% increase. Our specialties business also achieved new all-time quarterly records with revenues of $143 million, up 63% year-over-year, and gross profit of $45 million, an increase of 17%. Despite ongoing macroeconomic uncertainty and volatility, we continue to benefit from a business intentionally built for durability and resilience, enabling us to remain focused on what we can control regardless of underlying economic trends. With April's continued strong product demand, the impact of April 1 price increases, and ongoing optimization efforts, we're reaffirming our full year 2026 adjusted EBITDA from continuing operations guidance of 2.43 billion at the midpoint. Turning to end-market trends, we continue to see a constructive backdrop for US infrastructure, our most aggregates-intensive and counter-cyclical end market. Sustained federal and state investment continues to provide meaningful multi-year funding visibility as we look ahead to the next surface transportation reauthorization. Notably, a significant portion of authorized funding under the Infrastructure Investment and Jobs Act, or IIJA, has yet to be deployed with nearly half of highway and bridge funding remaining undistributed as of late February. Policymakers are negotiating a 5-year successor surface transportation bill with committees targeting reauthorization by October 1st following the current IIJA's expiration on September 30th. While the timing remains subject to the legislative process and could include an interim continuing resolution, industry commentary from the American Road and Transportation Builders of America, or ARTBA, indicates that state departments of transportation retain multi-year visibility into their project pipelines and continue to plan under assumptions of stable federal funding. As a result, we do not expect a short-term continuing resolution to disrupt construction activity in 2026 and for the near future. Beyond infrastructure, heavy non-residential construction demand continues to be driven by robust data center and power generation activity. Aggregates-intensive LNG work along the Gulf Coast is also gaining momentum, including projects such as the one at Port Arthur LNG, which Martin Marietta is actively supplying. Warehouse and distribution construction trends continue to recover as shipments inflected positively in the third quarter of 2025 and have continued to trend favorably. By contrast, affordability pressures tied to higher interest rates continue to influence the pace of light non-residential and residential construction activity. Taken together, all these trends underscore the durability of long-term construction demand across our footprint and bode well for our company and shareholders. I'll now turn the call over to Michael to discuss our first quarter financial results. Michael, over to you.

Thank you, Ward. And good morning, everyone. As Ward noted, our core aggregates business delivered record first quarter revenues of 1.1 billion, up 14% year-over-year, driven by organic shipment growth of more than 7% and approximately one month of acquisition contributions. Daily shipments have continued to trend above expectations in April, led by infrastructure and non-residential strength in our east division. Organic pricing in the first quarter was negatively impacted by geographic mix driven primarily by robust organic shipment growth of more than 20% in our central and west divisions which carry lower average selling prices and gross margins than our east and southwest divisions. Reported aggregates gross profit declined 3% to $288 million as stronger volumes and underlying organic pricing improvements were more than offset by geographic mix and purchase accounting impacts including a non-cash $22 million charge associated with the fair market value step up of Quikrete inventory as well as higher depreciation, depletion, and amortization expense which is now disclosed within our product line reporting. Importantly, underlying organic cost of goods sold per ton, excluding pass-through freight cost and timing related items, is tracking below our implied 3% guidance as cost optimization efforts continue. Other building materials revenues declined 5% to $116 million and consistent with typical first quarter seasonality posted a $16 million gross loss driven by customary asphalt plant winter shutdowns in both Colorado and Minnesota. Our specialties business delivered revenues of $143 million and gross profit increased 17% to $45 million, both all-time quarterly records, reflecting contributions from the July 2025 Premier Magnesia acquisition and organic pricing gains, which were partially offset by lower organic shipments and higher energy costs. Turning to capital allocation, completion of the Quikrete asset exchange on February 23rd marked a significant milestone for the company, concluding our SOAR 2025 divestiture program, providing 450 million in cash, and simultaneously representing the largest aggregates acquisition in our history. With this transaction complete, we've now launched SOAR 2030, supported by a strong balance sheet and a focus on aggregates-acquisitive growth. The Quikrete integration is progressing ahead of plan with results since closing exceeding both our EBITDA and margin expectations. Further, we expect to realize synergies of approximately $50 million over the coming years as we normalize unit profitability. Importantly, the 450 million of cash proceeds combined with the company's significant free cash flow generation provides ample capacity to advance our very active M&A pipeline and opportunistically repurchase shares during times of market volatility. Consistent with this capital deployment framework, we repurchased $200 million of shares in the first quarter and announced the acquisition of New Frontier Materials, which complements our differentiated position along the I-70 corridor from Kansas City to St. Louis. Please note that our reaffirmed 2026 guidance does not include contributions from New Frontier as the transaction has not yet closed. Consistent with historical practice, we will revisit guidance at midyear. With that, I will now turn the call back over to Ward.

Thank you, Michael. The first quarter of 2026 marked the launch of SOAR 2030 and an important milestone in the continued evolution of our company's portfolio. Our increasingly aggregates foundation was strengthened by the closing of the Quikrete Asset Exchange and further reinforced by additional bolt-on aggregates acquisition activity already announced this year. Combined with our high-performing, differentiated specialties business, these actions have created a resilient and durable enterprise. This streamlined and focused portfolio, supported by attractive long-term demand drivers, advantaged market positions, and a culture deeply rooted in safety, commercial, and operational excellence, reinforces our confidence in SOAR 2030 and our ability to deliver sustainable growth and enduring value creation for our shareholders. If the operator now provides the required instructions, we'll turn our attention to addressing your questions.

Trey, thanks for the question. Good to hear your voice. So, several things. One, as you noted, we are reaffirming our guidance for the year relative to EBITDA. We feel very confident in that. As you know, this actually excludes anything from New Frontier because that hasn't closed yet. Secondly, we tend to come back at midyear and reassess our guidance. I'll tell you right now, I'm feeling pretty optimistic about what that reassessment is going to look like. So, I'm looking forward to that at midyear. I would say several things. One, if we just think about some of the reasons why, if we're looking at our shipment trends, as you may recall when we announced our guide in February for the year, we said if there was any place that we thought we were being a little bit probably conservative on, it may be on the shipment outlook. You can see how that came through in Q1. You can also tell from the prepared remarks today and the headlines to the release that April has come out of the box very attractively as well. So my guess is we're going to see shipments probably trending to the higher end of the guide. Relative to pricing, I'm not looking at pricing and having any concern about how I think that's going to roll out for the year. We did call out in the prepared remarks, I know Michael did, that what we saw in the central and west groups in particular was volumes up 21%. I mean that's a big number. And keep in mind, pricing there is notably lower and by that I mean dollars per ton lower than it is in the east and the southwest. And so what we've seen so far in April is we're seeing that mix flow back to the type of cadence that we would ordinarily expect. So we're seeing the east really catch up nicely with that. Keep in mind, too, I anticipate we're going to see a greater realization of mid-year price increases this year than we saw last year. Clearly, the diesel impact and others will be a driver on that. That is not taken into account in our guide. So, again, it's something that gives me a lot of confidence in what we're doing. I know part of your question dealt very specifically with diesel and how we see that. So, if you think about the fact that we're going to consume, let's call it, 55-ish million gallons of diesel fuel this year, that's assuming that diesel prices peak probably in Q2 and then return not to lower levels, but probably somewhat more moderated levels in Q3 and Q4. We feel like the overall impact from diesel headwinds, and that's including other items impacted by it, will be about $36 million in the aggregates business, probably $50 million for the entire company. So it's not going to be anything that's material. The other thing that I would remind you is if we go back in time and remember what diesel pricing looked like back when Ukraine and Russia first started their conflict, diesel spiked and then we saw that headwind for a while and then we actually saw a nice margin expansion actually later that year. This is not as pronounced as that was at the time. So, I feel like it's very manageable and again to your point with what's going on in infrastructure and what's going on with heavy non-residential activity, I think the volume backdrop will continue to be very attractive. But Trey, I hope that helps.

You know what, it is weighted more there. I'll turn it over to Michael to talk to you a little bit more about any modeling questions you may have.

Yeah, Trey, you're absolutely right. So, we're thinking about 20 to 25 million of it coming through in Q2 given where spot rates are. But just in terms of the organic cost cadence as compared to last year, remember in Q1 of last year we had sub 2.5% COGS per ton growth and then we had 6-ish percent in Q2 and Q3 and 4 in Q4. So we've now passed the tough cost comp growth. And so we feel very good about the implied costs per ton through the balance of the year, you know, assuming we do get a little bit of diesel headwind embedded in there as well.

You're welcome. Thank you for the question. And so I would say several things. We're totally aligned with what you're hearing and that is nothing in this is going backward. I think it's really important to note that as we're looking at what's likely to come out of the House and the Senate, neither committees of jurisdiction are planning to include broader infrastructure components like energy, broadband programs, or others that made up more than half of the 2021 infrastructure law. So I think to your point, this is going to be a highways, bridges, roads, and streets core infrastructure bill and we don't see anything that's changing that overall notion. As we're looking at it right now, from my understanding, the House is targeting May to mark up the legislative text. So we'll certainly know more then, but I think the numbers that you've indicated are certainly what I've heard from Chairman Graves and others who are on that committee. I also think we're likely to see numbers notably ahead of that coming out of the Senate. So, as this goes to a conference, I think we're going to see a nicely, a nice solid robust core surface transportation bill that's going to come out. I think they're still aiming to have this done in time so they don't have to have a CR. I do think if they have to have a CR, it's likely going to be one. I think it's likely to be relatively short. And of course, Katherine, as you know, if they do end up with a CR, what that means is the federal highway funds will continue to flow to the states in an uninterrupted fashion and will remain at the current levels that are actually very high and attractive. The other thing that I think goes unheralded, but I think it's important to remember is if we look at Martin Marietta state DOT budgets, those budgets, not in every instance, but in the vast majority of instances are up year-over-year, which tells us that they're anticipating not seeing any interruptions from the federal side as well. So, I've tried to address what does timing look like. I've tried to address what it's looked like coming out of the House because I think that's going to lead. I've tried to address what we see coming out of the Senate and I've tried to address a CR that if we have one, frankly, we're not the least bit concerned about. So, Katherine, again, I hope that helps.

Yeah, you're hitting us with a hat trick coming out of the box, Adam. So, I'd say several things. Quikrete has frankly exceeded expectations and the integration has gone really well. The business is performing better than we expected. I mean we saw $17 million of EBITDA which on an annualized basis is going to be well ahead of anything that we saw. You know the fact is we worked through and are continuing to work through very sensibly the markup in the inventory. I mean that's the tyranny of purchase price accounting that we always have to manage. When we came out with that transaction, as you recall, we said we thought we'd have around $50 million of synergies. I don't think we see anything in that number that causes us any degree of heartache whatsoever. And hopefully we can see more on that. Relative to New Frontier, we're really excited about that transaction. So, if you think about what that's doing in the purchase of Quikrete, we bought very attractive assets in Virginia, attractive assets in Missouri and Kansas, and attractive assets in British Columbia. And what New Frontier is doing is it's adding more assets in what for us is a very attractive market position in Missouri right now. And we're excited about the transaction, not just because of where it is, but the really high quality team that's coming with that as well. So we're excited to welcome them to Martin Marietta hopefully sooner rather than later. It's an interesting transaction because as we noted in the prepared remarks, this is about 8.5 million tons annualized of aggregates and about 1.5 million tons annualized of asphalt. But keep in mind, this business is a lot like the Tiller business that we bought years ago, meaning it's an FOB asphalt business. So, we're not involved in lay down there. It's truly a materials business. And again, we think this is going to be nicely accretive to what we're doing in the middle part of the country that as Michael called out in his commentary is really a differentiator for us. Relative to the pipeline, it's looking pretty attractive. Look, as we discussed at last year's capital markets day, we've identified at least 300 million tons a year of businesses that are in SOAR-related markets that we think are compelling to us. As I indicated in my commentary as well, we continue to be focused largely on pure aggregate transactions and I think New Frontier is a great example of that. I mean 8.5 million tons is not a trifling acquisition and we continue to see that opportunity for more and we look forward to doing that very successfully this year and into next year and beyond. So Adam, I hope that hit the three parts.

Anthony, thanks for the question. I would say several things. One, if we look at the ARTBA data, there's nothing that's been in that that's been surprising to me. I think the other thing that's worth noting is ARTBA will typically say that value contract awards can be particularly volatile in the first quarter and that's really as state and local governments typically simply bid less work in the early parts of the year. I think importantly, as I try to give you a guide on how to think about it going forward as your question indicated, I look at the spending authority and I think that's really important to look at relative to our leading states. So, if I'm looking at Texas, which matters disproportionately to us, that's up almost 15%. If I'm looking at Colorado, which is one of our leading states in the West, that's up nearly 7%. If I'm looking at Georgia, which is a critically important state to us, we're the largest aggregates producer in Georgia, that's up almost 12%. And then in California, it's been interesting to watch that. They're up almost 6.5%. So again, as we're looking at what's coming out of the federal government, as we're thinking about timing and choppiness, that's not unusual, particularly in Q1, and as we're looking at that level of spending authority in our top DOT states on the public side, it actually gives me a great deal of confidence. The other thing that helps in that respect is simply looking at what's happened so far this year. Now, keep in mind, if we're looking at Q1, about 18% of our volume for the full year is going to go in Q1. So, I mean it's not necessarily a driver of anything that's going to happen for the rest of the year, which is why we never, for example, update our guidance at the end of Q1. You have a much better feel for it when you get to half year. But I do think this is notable if I'm looking at tonnage that went to highways and streets in Q1 versus the prior year quarter, they're up 23%. So, I mean I think that gives us a good sense of where it's heading right now and takes me back to some of the commentary that I gave early on. If we're being conservative anywhere, it's probably on the volume outlook. And I think as we look at the volume outlook, we're very bullish on the way public is going to pull through. So Anthony, again, I hope that helps you as well.

Yeah. No, sure. Sure, Tyler. What I would say is on an organic basis, our guide for the full year would still remain firmly intact which would see a gross profit of call it double digits for the year. Now how that plays out through the balance of the year, as Ward mentioned, there's probably going to be more volume, so volume trending to the high end and in fact, as we sit here closing April, we're at the high end of a full-year guide with how much volume we've already banked. And with the pricing, it's just difficult to make up in a calendar year the pricing that we saw in Q1 given the geo mix over the balance of the next three quarters. So what we said is look, we're seeing that...

Broaden out with the East Division, higher ASP leading the way in April. So we're starting to see that geo-mix shift on ASP, which also flows through to the margin because it's not only higher ASP, it's lower cost to produce in the East as well. So we're going to see that come through here in Q2 and into the balance of the year, but making that up might be difficult. So, we're saying, hey, look, organic pricing might be towards the 4% absent any midyear, but you know, we're going to be out and in fact, we're already out with midyears pretty much across the entire country. Where we expect to see a lot of that is also in the East and where we completed acquisitions this year. So, there's nothing in the organic guide that gives us any pause. In fact, we feel pretty confident in that. And then getting to the full-year EBITDA guide. As Ward mentioned, Quikrete has actually come out of the gate much better than expected in just one month with 17 million of EBITDA, 42% EBITDA margin. So nicely accretive and their volume is actually exceeding expectations but at a little bit lower reported ASP but remember we always said it was ASP dilutive but margin accretive. So what do we mean by that? These are relatively low cost of production operations. So, we're going to start to see that flow through once we eat through the inventory markup, which as Ward mentioned, there's about 44 million of that left to chew through in Q2. But of course, that's an add back to EBITDA, but it's going to be a hit to add gross profit in Q2 just for modeling purposes. But does that answer your question, Tyler, or any more color you need?

Yeah. On a price-cost spread basis, absolutely.

Yeah. And think about that really over a five-year period, not in a quarter or a year. So, what we said is there's a long history in this industry and Martin Marietta specifically of delivering 200 basis points of spread over a five-year interval. And what we're saying is this year given or this five-year period, you know, we expect to expand that by about 50 basis points. So look at that over a five-year period and not in any particular quarter.

And Tyler, let me add one more thing too because and I think this is important because you nailed it and that is there are a lot of moving parts right now. So cutting through and trying to get to really clear numbers is important. And the cost performance is something that I want to make sure you have a clear look at too because I'm looking at that through two different lenses. Number one, what does it look like organically? Number two, what does it look like on a consolidated basis? And here's what I would tell you. If we're looking at organic cost of goods, I would say several things. One, take out the external freight because that's simply a pass through. We had some one-off rail maintenance and track repair expenses. If we're really looking at it same on same, COGS per ton went up about 2.7% organically. If we're looking at it on a consolidated basis and again taking out the fair market inventory markup, the external freight and just the acquired EBITDA, COGS were up around 1.7%. So I think to Michael's point, the cost-price spread that we anticipate seeing is fully intact. And part of what I'm taken by, as you may recall, we actually took our CapEx guide down very purposely coming into the year because we felt like we had invested in the business really responsibly the last several years and that really came through in what we're seeing in lower repairs and supply expenses as well. So I wanted to come back and give you even more color relative to okay, these are the things that we talked about at Capital Markets Day. These are the things that you built into a model over time and are they firmly intact? I don't think there's any question as we drilled down and look at these that they are.

Thank you, Tyler.

Thank you for the question. The short answer is we are expecting midyears in those markets. We have already put our correspondence to our customers indicating as much and obviously as we've indicated before the ASPs overall that Quikrete had in their business were not at the same level that Martin Marietta typically is. So you know our aim is to try to get that closer to something that looks normal across our enterprise. So yes, that is very specifically one of the areas in which we anticipate mid-year price increases.

You know what? I would say that our conviction remains the same. It was a very attractive business. Now we have the synthetic and natural magnesia. It's a business that continues to have earned the right to grow. They're executing against their plan very, very well. It's not necessarily a seasonal business. So again, I think that's important to have within a seasonal business because it gives you such good stability all the way through portions of the year. So everything we look at in that we like, their safety culture is becoming more aligned with ours. Their margins still have room for improvement and the core business is running very well. So nothing there to be concerned about from my perspective.

You bet.

So I would say several things as we think about hot mix for itself. Several things that are worth noting. Number one, we can actually store a lot of liquid. So if we're looking at our physical position today, particularly in Minnesota, because part of what we bought when we bought Tiller was a very significant tank farm, we used winter fill to go through that. I think from an energy perspective and otherwise, we're going to be in a very good position in our asphalt business. Equally, if we think about the asphalt business, it's not a huge portion of it that's in California, but California also has indexing that's basically there. So as it flows through, we're going to be in fine shape on that. And again to keep in mind from an EBITDA or other perspective, you know, these downstream businesses are not going to add huge amounts of EBITDA to it. It's really in some respects more to take the stone and push it through those markets. So I think we're going to be in a perfectly good spot there. I think relative to concrete, again, if you're looking at where we have concrete now, it's really a pretty concise marketplace. It's really in Arizona. We're talking about a concrete business now that on an annualized basis is going to have let's call it about 1.2 million cubic yards. So if you go back several years and remember look this used to be about a 10 million cubic yard business and now it's down to about 1.2 million cubic yards. Arizona is an attractive ready-mix market for us. We are seeing some price increases there. So we would anticipate that business performing very much in line with the way that we indicated and again given what we can do on asphalt and liquid storage we don't feel like the energy component is going to be a threat to that business on the hot mix side either.