Martin Marietta Materials, Inc. (MLM) — This company is the second largest producer of construction aggregates in the United States. It receives about half of aggregates revenue from public works and infrastructure, a more stable source of revenue than commercial construction.
Capital IQ notes federal highway spending is expected to remain steady, but growth should come from increased state-level infrastructure and higher demand in the housing market. Its analysts also expect the July 2014 acquisition of Texas Industries to contribute to sales.
They project revenue will grow 28% in 2015 and another 12% in 2016. In May, they increased their earnings forecast, upping 2015 estimated EPS by $0.14 to $5.26 and 2016 by $0.43 to $7.47.
In early May, Capital IQ increased its 12-month target for MLM stock by $26 to $168, saying there is significant demand and price increases coming in all of the company’s markets while raw material costs should remain relatively low.
MLM stock meandered in a range just below $100 to $135 for all of 2013 and 2014. Then, as the economy picked up and federal and state money flowed into highway improvements, the stock broke out. A high-volume breakaway gap in February signaled the end to the lengthy consolidation, and shares quickly ran above $140.
MLM stock then consolidated at the $140-$145 level, forming the first in a series of “step ups” as it broke to a high near $156 in May. Then another consolidation was followed by another breakout in early July.
MLM stock is again in a consolidation, which will likely end with another new high. But before they break out, try to buy shares under $152 for a trading target of $172 within three months. This would result in a gain of more than 13%.
Long-term investors may also want to buy this quality construction materials stock. My 12-month target is $200-plus, which could offer a return of roughly 30%.
