Stock Analysis

Martin Marietta Materials Inc (NYSE:MLM): Set To Experience A Decrease In Earnings?

NYSE:MLM
Source: Shutterstock
Looking at Martin Marietta Materials Inc's (NYSE:MLM) earnings update in December 2017, analyst forecasts appear to be pessimistic, with profits predicted to drop by -23.31% next year against the past 5-year average growth rate of 33.06%. With net income at current levels of US$711.31M, the consensus growth rate suggests that earnings will decline to US$545.49M by 2019. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for Martin Marietta Materials in the longer term. For those keen to understand more about other aspects of the company, you can research its fundamentals here. View our latest analysis for Martin Marietta Materials

How will Martin Marietta Materials perform in the near future?

Over the next three years, it seems the consensus view of the 10 analysts covering MLM is skewed towards the negative sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To reduce the year-on-year volatility of analyst earnings forecast, I've inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
NYSE:MLM Future Profit Mar 21st 18
NYSE:MLM Future Profit Mar 21st 18
By 2021, MLM's earnings should reach US$732.45M, from current levels of US$711.31M, resulting in an annual growth rate of -0.22%. However, if we exclude extraordinary items from earnings, we see that the profits is predicted to rise over time, resulting in an EPS of $11.59 in the final year of forecast compared to the current $11.3 EPS today. Contraction in the bottom line seems to suggest cost outpacing top line growth of 10.08% over the next few years. Furthermore, the current 19.11% margin is expected to contract to 15.68% by the end of 2021.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Martin Marietta Materials, there are three important factors you should further examine:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is Martin Marietta Materials worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Martin Marietta Materials is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Martin Marietta Materials? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

Valuation is complex, but we're helping make it simple.

Find out whether Martin Marietta Materials is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.