Longbow Research Buying Matin Marietta On Pullback; Upgrades Stock

• Shares of Martin Marietta Materials, Inc. MLM have risen almost 42 percent year to date, reaching a high of $176.51 on September 16.
• Garik Shmois of Longbow Research has upgraded the rating on the company to Buy, with a price target of $188.
• With the pullback in the stock from its recent highs, Shmois believes that the share offer an attractive entry point.

“While we appreciate recent concerns regarding the nonresidential recovery as well as disappointing Texas cement volume data in August, we have confidence in the much more critical aggregates cycle as driving earnings growth,” Schmois explained.

Schmois expressed optimism regarding Martin Marietta Materials’ geographic mix in the Southest, which is expected to drive incremental margins for the company.

“MLM’s business mix is actually defensive when considering no aggregates import threats and its pure US exposure,” the Longbow Research report stated.

Schmois also believes that the concerns regarding “the demise of Texas cement” have been overdone, given its limited impact on the company’s EBITDA. Investor sentiment is expected to “turn again around earnings season – per usual.”

In addition, the continuing strong free cash flow generation offers the company opportunities for buybacks and additional M&A.

The 3Q15, FY15, FY16 and FY17 EBITDA estimates have been marginally lowered “to account for a more conservative run rate in cement.”