Martin Marietta Materials, Inc. MLM inked a deal with Smyrna Ready Mix Concrete LLC to sell Colorado and Central Texas-based ready mixed concrete operations. The deal is likely to close on Mar 31, 2022, subject to certain regulatory approvals and other customary closing conditions. The transaction is in line with MLM’s Strategic Operating Analysis and Review (SOAR) 2025 plan.

Post the news release, MLM stock moved up 0.16% on Mar 24.

Ward Nye, the chairman, president and CEO of Martin Marietta, said, “Proceeds from this divestiture will be used to advance our longstanding capital allocation priorities, which are focused on value-enhancing acquisitions, prudent organic investments, and returning cash to shareholders through both a meaningful and sustainable dividend and our share repurchase program.”

Inorganic Moves Bode Well

Martin Marietta is banking on long-term strategic plans, commonly known as SOAR. MLM’s SOAR 2025 plan includes the ongoing evaluation of aggregates-led opportunities of scale in new domestic markets, expansion through acquisitions that complement the existing operations and divestiture of assets that are not consistent with the stated goals. On that note, the company spent $3.1 billion in acquisitions in 2021.

On Mar 1, the company inked a deal with CalPortland Company to sell certain California-based West Coast cement and ready mixed concrete operations for $250 million in cash. The operations include the Redding cement plant, related cement distribution terminals and 14 ready-mixed concrete plants

On Oct 1, 2021, Martin Marietta completed its largest acquisition of Lehigh Hanson, Inc.’s West Region business for $2.3 billion in cash, thereby propelling growth in California and Arizona.

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Shares of this Zacks Rank #3 (Hold) company have gained 7.5% in the past six months versus the Zacks Building Products - Concrete and Aggregates industry’s 0.3% fall. The company’s priorities are centered on value-enhancing acquisitions, prudent organic capital investment and consistent return of capital to shareholders while maintaining an investment-grade rating profile.

That said, higher diesel and raw material costs along with adverse weather raise concerns for MLM and other industry players like Vulcan Materials Company VMC, Summit Materials, Inc. SUM and Cornerstone Building Brands, Inc. CNR.

We believe that the recent move and improved pricing as well as disciplined cost management throughout the business will help it mitigate these risks.

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