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Martin Marietta (MLM) to Acquire Ferrovial's SCC for $140M

Martin Marietta Materials, Inc. MLM has been strengthening its geographic footprint with solid buyouts. To this end, this construction aggregates supplier has inked a deal with Spanish conglomerate Ferrovial to acquire the latter’s U.S.-based unit Southern Crushed Concrete (SCC) for $140 million, per Reuters.

Texas-based SCC — established in 1991 — uses practical and inexpensive methods to produce recycled concrete for a variety of construction projects throughout Southeast Texas. Apart from public and private projects, SCC is very active in the community, helping in rubble removal from hurricanes and industrial areas in Houston as well as building a local little league baseball parking lot at no cost.

Ferrovial agreed upon selling its recycled aggregates activity at Webber in June. Even so, the transaction was pending for authorization from regulatory bodies.

Inorganic Moves Bode Well

Martin Marietta has been acquiring businesses to expand footprint and drive growth. On May 24, the company announced that it intends to acquire Lehigh Hanson, Inc.’s West Region business (Lehigh West Region) for $2.3 billion in cash. The move was consistent with the company’s SOAR (Strategic Operating Analysis and Review) 2025 plan and will enhance its reach in new geographies for persistent industry-leading growth. The strategic move will add 17 active aggregates quarries, two cement plants with related distribution terminals and targeted downstream operations to its portfolio.

On Apr 30, the company acquired Minnesota-based Tiller Corporation (“Tiller”), which will be integrated into the Central Division. Tiller is the leading aggregates and FOB hot mix asphalt supplier in the Minneapolis/St. Paul region. This strategic and value-enhancing acquisition will enhance Martin Marietta’s high-margin, upstream materials business in one of the largest as well as fastest growing mid-western metropolitan areas.

The company’s priorities are focusing on value-enhancing acquisitions, prudent organic capital investment and consistent return of capital to shareholders while maintaining an investment-grade rating profile.

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Shares of Martin Marietta have advanced 7% over the past three months compared with the Zacks Building Products - Concrete and Aggregates industry’s 3.1% rally.

That said, higher diesel and raw material costs along with adverse weather raise concerns. Earnings estimates for 2021 have moved 1.5% downward over the past 30 days. This depicts analysts’ concern over the company’s prospects. We believe that the recent move, and improved pricing as well as disciplined cost management throughout the business will help it to mitigate these risks.

Zacks Rank

Martin Marietta — which shares space with Cornerstone Building Brands, Inc. CNR, Eagle Materials Inc. EXP and U.S. Concrete, Inc. USCR in the same industry — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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