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On Wednesday, JPMorgan issued a downgrade for Martin Marietta Materials (NYSE:MLM) shares, adjusting the rating from Overweight to Neutral and maintaining the price target at $560. The new target suggests a 15% potential upside from the stock’s current trading level. The shift in rating comes as InvestingPro data shows 8 analysts have revised their earnings estimates downward for the upcoming period. The $29.77 billion market cap company maintains a GOOD overall financial health score, according to InvestingPro’s comprehensive analysis. The shift in rating and price target reflects a revised EBITDA estimate for the current year, now set at $2.275 billion, a 3% decrease from prior projections.
The lowered EBITDA forecast stems from a reduction in margin expectations, which JPMorgan analysts now set at 32%, a decrease of 0.7 percentage points. However, the revised estimate remains aligned with Martin Marietta Materials’ guidance, which ranges between $2.15 billion and $2.35 billion. The guidance suggests an approximate 10% year-over-year growth, building on the company’s last twelve months EBITDA of $2.057 billion. Despite the adjustments, the company’s revenue outlook remains largely unchanged, with a 9% year-over-year increase anticipated from its current revenue base of $6.536 billion. For deeper insights into MLM’s financial metrics and growth potential, investors can access the detailed Pro Research Report available on InvestingPro.
Analysts at JPMorgan have incorporated a 4% year-over-year growth in aggregate volumes and a 6.3% increase in prices into their projections. They noted that Martin Marietta Materials has been slightly more aggressive than its peers in terms of pricing, which could lead to lower upside risks. The downgrade to Neutral reflects these considerations and the stock’s current P/E ratio of 15.01x, which is slightly higher than Vulcan Materials Company (NYSE:VMC) and aligns with Martin Marietta’s historical average. Notably, InvestingPro analysis indicates the stock trades at an attractive PEG ratio of 0.21, suggesting potential value relative to its growth prospects.
The price target of $560 is based on a forward EV/EBITDA multiple of 15.5x, which is about half a standard deviation above the company’s five-year average. Additionally, the valuation includes a discounted cash flow (DCF) calculation with a 7.5% weighted average cost of capital (WACC) and a 4.0% terminal growth rate. This valuation approach underpins the revised price target and the current perspective on the stock’s potential. According to InvestingPro’s Fair Value analysis, the stock currently appears to be trading above its intrinsic value, suggesting investors should carefully consider their entry points.
In other recent news, Martin Marietta Materials reported its fourth-quarter 2024 earnings, surpassing expectations with earnings per share of $4.79, compared to the forecast of $4.64. However, the company’s revenue slightly missed projections, coming in at $1.63 billion against an anticipated $1.65 billion. Analysts from Stifel have reinstated coverage on Martin Marietta with a Buy rating, highlighting the company’s strategic focus on aggregates and its strong market presence, particularly in Texas. Meanwhile, Citi and Truist Securities have adjusted their price targets to $594 and $610, respectively, while maintaining Buy ratings, citing factors such as a lighter guidance and potential opportunities for growth in 2025.
Raymond (NSE:RYMD) James also revised its price target for Martin Marietta to $600, maintaining an Outperform rating and expressing confidence in the company’s performance in the heavy non-residential and public sectors. The company’s recent mergers and acquisitions are noted as refining its business model towards a more focused approach on aggregates. Martin Marietta’s management has projected a 4% growth in aggregate shipments and a 6.5% increase in pricing for 2025. Despite the mixed results in revenue and earnings, analysts generally maintain a positive outlook on Martin Marietta’s future performance, supported by infrastructure demand and strategic capital deployment.
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