Where Eagle Materials Dares

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That high-pitched scream you hear isn't an eagle. It's shorts of EagleMaterials (NYSE: EXP) reviewing the short-term damage in the wake of what looks like a great fiscal third quarter.

Sales from this manufacturer of building materials such as gypsum wallboard, cement, and such rose 41% in the quarter as construction demand stayed strong and little new capacity came on board. The company also got a boost in profitability, and reported earnings per share were up 57% over last year's level.

Growth was led by gypsum wallboard, the company's largest business at present. Sales here rose 40% on an 11% increase in volume and a 32% increase in average selling prices. Higher costs for shipping, energy, and whatnot apparently didn't do too much damage, as segment operating income rose 93%. Likewise in cement, where sales grew 36% on top of a 19% volume increase, and operating earnings rose 38% in the quarter. For the rest of the segment details, I'd suggest reading the company's press release -- it provides lots of detail.

So what about this slowdown in new construction that we're hearing about? Management apparently isn't buying into that too much. Capacity utilization in the wallboard industry looks to be in the high 90s, and low inventories (plus high demand) are boosting cement prices. Whether it's cockiness or confidence, management substantially raised its guidance -- boosting fiscal '06 guidance about 8% over the current average and '07 guidance by about 24% over the average.

And that's not all. The company also made what I think are some shareholder-friendly announcements. It's going to collapse the two classes of stock into one, hike the dividend, and increase the buyback authorization. Eagle is also boosting capacity at two Western cement facilities and splitting its stock 3-for-1, though I consider that latter item pretty insignificant.

There's no doubt about it -- these are good times for basic materials players like Eagle, Cemex (NYSE: CX), and Florida Rock (NYSE: FRK). And while there's equally no doubt in my mind that the good times will stop rolling someday, I'm not about to stick my neck out and say that day is coming soon. After all, messing around with an eagle can be hazardous to your health.

For more related Foolishness:

• Cemex Still Looks Solid
• A Concrete Rose in Texas
• Cement Maker Pours It On

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).