BUY HOLD SELL A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F Annual Dividend Rate BUSINESS DESCRIPTION Martin Marietta Materials, Inc., together with its subsidiaries, supplies aggregates products and heavy building materials for the construction industry in the United States and internationally. Sector: Materials Sub-Industry: Construction Materials Source: S&P BUY BUY RATING SINCE 12/04/2012 TARGET PRICE $240.69 Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years TARGET PRICE $240.69 260 240 220 STOCK PERFORMANCE (%) 3 Mo. 1 Yr. 3 Yr (Ann) Price Change -2.54-5.04 20.18 GROWTH (%) Last Qtr 12 Mo. 3 Yr CAGR Revenues -1.47 6.17 14.22 Net Income -4.98 6.17 50.47 EPS -4.02 8.20 42.51 RETURN ON EQUITY (%) Ind Avg S&P 500 Q3 2017 10.04 6.98 13.41 Q3 2016 9.85 7.36 11.79 Q3 2015 6.33 4.18 12.91 P/E COMPARISON Rating History BUY Volume in Millions 2016 2017 COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History 200 180 160 140 120 10 5 0 RECOMMENDATION We rate () a BUY. This is driven by some important positives, which we believe should have a greater impact than any nesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income. 30.38 EPS ANALYSIS¹ ($) Q1 0.07 Q2 1.22 Q3 1.74 2015 Q4 1.26 Q1 0.69 27.01 Ind Avg Q2 1.90 Q3 2.49 2016 NA = not available NM = not meaningful Q4 1.55 Q1 0.67 25.45 S&P 500 Q2 2.25 Q3 2.39 2017 1 Compustat fiscal year convention is used for all fundamental data items. HIGHLIGHTS The current debt-to-equity ratio, 0.40, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.32, which illustrates the ability to avoid short-term cash problems. ' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, increased its bottom line by earning $6.63 versus $4.29 in the prior year. This year, the market expects an improvement in earnings ($6.81 versus $6.63). The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Construction Materials industry and the overall market on the basis of return on equity, has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500., with its decline in revenue, slightly underperformed the industry average of 8.2%. Since the same quarter one year prior, revenues slightly dropped by 1.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share. The gross profit margin for is currently lower than what is desirable, coming in at 33.74%. Regardless of 's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, 's net profit margin of 13.93% compares favorably to the industry average. PAGE 1
PEER GROUP ANALYSIS REVENUE GROWTH AND EBITDA MARGIN* Revenue Growth (TTM) -50% 300% FRTA UNFAVORABLE USCR TGLS CADC 10% EBITDA Margin (TTM) SUM FAVORABLE EXP VMC CPAC USLM 35% Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $12.1 Million and $16.6 Billion. Companies with NA or NM values do not appear. *EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization. REVENUE GROWTH AND EARNINGS YIELD Revenue Growth (TTM) -50% 300% UNFAVORABLE CADC -90% Earnings Yield (TTM) FRTA FAVORABLE USCR USLM SUMTGLS VMC EXP CPACCX CX 10% Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between -16.1% and 256.7%. Companies with NA or NM values do not appear. INDUSTRY ANALYSIS The US construction materials industry includes manufacturers of sand, clay, gypsum, lime, aggregates, cement, concrete, and bricks. There are approximately 120 cement manufacturers, 130 brick plants, 500 asphalt companies, 200 gypsum manufacturers, and 1,000 concrete block makers in the US. Major players are Martin Marietta Materials (), and Vulcan Materials (VMC). Production shrunk during the last recession due to falling demand in the residential housing market, although the U.S. government stimulus has added some publicly-funded projects to sustain industry jobs. This industry is capital-intensive, mature, and linked to real estate development activity. It is also highly fragmented, with the five largest companies holding under 30% of market share and the ten largest companies holding only 40% of market share. With the ending of the recent real estate slump, the difficult conditions which have previously hurt construction activity and reduced demand should abate. Inflation in construction materials is apparent in prices of lumber, steel, cement, natural gas, and oil. The market is likely to remain geographically fragmented due to high transportation costs. Industry outlook is challenging. However, non-residential construction and residential spending are recovering as the backlog of existing properties are utilized. Concrete, gypsum, copper, and wood prices are expected to rise in the economic rebound. According to the Portland Cement Association, the financial institution bailouts and massive stimulus packages, including the Troubled Asset Relief Program (TARP) and Public Private Investment Program (PPIF), were helpful in reviving the industry. PEER GROUP: Construction Materials Recent Market Price/ Net Sales Net Income Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M) MARTIN MARIETTA MATERIA 208.39 13,099 30.38 3,943.93 435.02 FRTA FORTERRA INC 9.84 633 NM 1,573.35-93.95 EXP EAGLE MATERIALS INC 111.93 5,443 25.67 1,323.49 210.88 USLM U S LIME & MINERALS 85.35 476 24.53 143.77 19.49 SUM SUMMIT MATERIALS INC 30.76 3,337 45.24 1,865.52 76.32 TGLS TECNOGLASS INC 6.90 236 NM 308.14-8.40 VMC VULCAN MATERIALS CO 125.65 16,621 45.36 3,785.78 386.24 USCR U S CONCRETE INC 80.85 1,346 107.80 1,313.46 12.99 CADC CHINA ADVANCED CONSTR MATLS 5.05 12 NM 45.05-9.77 CX CEMEX SAB DE CV 7.59 11,055 12.44 13,113.39 1,125.84 CPAC CEMENTOS PACASMAYO SAA 12.51 1,061 39.09 371.77 28.63 The peer group comparison is based on Major Construction Materials companies of comparable size. PAGE 2
Annual Dividend Rate COMPANY DESCRIPTION Martin Marietta Materials, Inc., together with its subsidiaries, supplies aggregates products and heavy building materials for the construction industry in the United States and internationally. The company mines, processes, and sells granite, limestone, sand, gravel, and other aggregate products for use in the public infrastructure, and nonresidential and residential construction industries, as well as in the agriculture, railroad ballast, chemical, and other applications. It also offers asphalt products, ready mixed concrete, and road paving construction services; and produces Portland and specialty cements for use in infrastructure projects, and nonresidential and residential construction, as well as in the railroad, agricultural, utility, and environmental industries. In addition, the company manufactures and markets magnesia-based chemical products for the industrial, agricultural, and environmental applications; and dolomitic lime primarily for use in the steel industry. Its chemical products are used in flame retardants, wastewater treatment, pulp and paper production, and other environmental applications. The company was founded in 1993 and is headquartered in Raleigh, North Carolina. 2710 Wycliff Road Raleigh, NC 27607 USA Phone: 919-781-4550 http://www.martinmarietta.com STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and nesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock s valuation. Please refer to our Valuation section on page 5 for further information. FACTOR SCORE Growth 5.0 out of 5 stars Measures the growth of both the company's income statement and cash flow. On this factor, has a growth score better than 90% of the stocks we rate. Total Return 3.0 out of 5 stars Measures the historical price movement of the stock. The stock performance of this company has beaten 50% of the companies we cover. Efficiency 4.0 out of 5 stars Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 70% of the companies we review. Price volatility 3.5 out of 5 stars Measures the volatility of the company's stock price historically. The stock is less volatile than 60% of the stocks we monitor. Solvency 4.5 out of 5 stars Measures the solvency of the company based on several ratios. The company is more solvent than 80% of the companies we analyze. Income 3.0 out of 5 stars Measures dividend yield and payouts to shareholders. The company's dividend is higher than 50% of the companies we track. THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. PAGE 3
Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial 1.50 Q4 FY17 6.81 E 2017(E) 8.79 E 2018(E) INCOME STATEMENT Net Sales ($mil) 1,087.73 1,103.90 EBITDA ($mil) 309.78 310.91 EBIT ($mil) 234.46 238.53 Net Income ($mil) 151.55 159.48 FINANCIAL ANALYSIS 's gross profit margin for the third quarter of its fiscal year 2017 is essentially unchanged when compared to the same period a year ago. Sales and net income have dropped, underperforming the average competitor within its industry. has average liquidity. Currently, the Quick Ratio is 1.32 which shows that technically this company has the ability to cover short-term cash needs. The company's liquidity has increased from the same period last year. At the same time, stockholders' equity ("net worth") has remained virtually unchanged only increasing by 4.23% from the same quarter last year. Together, the key liquidity measurements indicate that it is relatively unlikely that the company will face financial difficulties in the near future. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit www.thestreetratings.com. BALANCE SHEET Cash & Equiv. ($mil) 35.22 60.68 Total Assets ($mil) 7,566.79 7,373.20 Total Debt ($mil) 1,723.59 1,764.84 Equity ($mil) 4,331.22 4,155.33 PROFITABILITY Gross Profit Margin 33.74% 33.13% EBITDA Margin 28.47% 28.16% Operating Margin 21.55% 21.61% Sales Turnover 0.52 0.50 Return on Assets 5.74% 5.55% Return on Equity 10.04% 9.85% DEBT Current Ratio 2.73 1.97 Debt/Capital 0.28 0.30 Interest Expense 23.14 20.57 Interest Coverage 10.13 11.60 SHARE DATA Shares outstanding (mil) 63 63 Div / share 0.44 0.42 EPS 2.39 2.49 Book value / share 68.90 65.47 Institutional Own % NA NA Avg Daily Volume 589,567 607,473 2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates. PAGE 4
RATINGS HISTORY Our rating for has not changed since 12/4/2012. As of 11/30/2017, the stock was trading at a price of which is 14.7% below its 52-week high of $244.32 and 9.1% above its 52-week low of $191.09. 2 Year Chart BUY: $157.40 2016 $250 $200 $150 MOST RECENT RATINGS CHANGES Date Price Action From To 11/30/15 $157.40 No Change Buy Buy Price reflects the closing price as of the date listed, if available RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS (as of 11/30/2017) 44.19% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months. 30.85% Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss. 24.96% Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns. TheStreet Ratings 14 Wall Street, 15th Floor New York, NY 10005 www.thestreet.com Research Contact: 212-321-5381 Sales Contact: 866-321-8726 VALUATION BUY. 's P/E ratio indicates a premium compared to an average of 27.01 for the Construction Materials industry and a premium compared to the S&P 500 average of 25.45. For additional comparison, its price-to-book ratio of 3.02 indicates valuation on par with the S&P 500 average of 3.24 and a premium versus the industry average of 2.41. The price-to-sales ratio is well above both the S&P 500 average and the industry average, indicating a premium. Upon assessment of these and other key valuation criteria, proves to trade at a premium to investment alternatives within the industry. Price/Earnings 30.38 Peers 27.01 Premium. A higher P/E ratio than its peers can signify a more expensive stock or higher growth expectations. is trading at a premium to its Price/Projected Earnings 23.71 Peers 18.63 Premium. A higher price-to-projected earnings ratio than its peers can signify a more expensive stock or higher future growth expectations. Price/Book 3.02 Peers 2.41 Premium. A higher price-to-book ratio makes a stock less attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. Price/Sales 3.32 Peers 2.06 Premium. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. industry. DISCLAIMER: Price/CashFlow 19.16 Peers 16.57 Premium. The P/CF ratio, a stock s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. is trading at a premium to its Price to Earnings/Growth 11.21 Peers 1.79 Premium. The PEG ratio is the stock s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. trades at a significant premium to its Earnings Growth lower higher 8.20 Peers 11.79 Lower. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. However, is expected to significantly trail its peers on the basis of its earnings growth rate. Sales Growth lower higher 6.17 Peers 5.40 Higher. A sales growth rate that exceeds the industry implies that a company is gaining market share. has a sales growth rate that exceeds its The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at http://www.thestreet.com/static/about/terms-of-use.html. PAGE 5