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Eagle Materials (EXP 0.26%) started its fiscal 2017 right where it left off last year, delivering solid results before the market opened on Monday. Strong cement demand from construction customers drove record fiscal first-quarter revenue, enabling the company to offset the impact of the oil market downturn on its business.

Eagle Materials results: The raw numbers


FQ1 2017 Actuals

FQ1 2016 Actuals

Growth (YOY)


$297.5 million

$285.0 million


Net earnings

$45.3 million

$37.8 million


Earnings per share




YOY = year over year. Data source: Eagle Materials.

What happened with Eagle Materials this quarter? 

Eagle Materials' cement sales were robust:

  • Cement revenue jumped 13% to $144.8 million thanks to a 2% increase in the net average selling price and a 4% increase in total volumes. Driving revenue was the company's shift from oil well cement to construction-grade cement as well as last year's acquisition of the Skyway Cement facility. Those catalysts fueled record operating earnings of $31.6 million, which was 23% higher than the year-ago quarter. Meanwhile, concrete and aggregate sales jumped 22% to $34.5 million, while operating profit surged 91% to $3.7 million due to improving pricing and sales volumes.
  • Gypsum wallboard and paperboard sales were up 2% to $141.6 million, while operating earnings jumped 8% to $50.6 million. Strong paperboard sales volume, which was up 20% year over year, was the chief catalyst driving this segment's improvement.
  • The oil and gas proppants segment, on the other hand, was atrocious. Revenue plunged 78% to $5.1 million, while the operating loss widened to $5.9 million. A stunning 68% decline in frack sand sales volumes was the driving factor behind this segment's weakness. Further, it's worth noting that this was a much weaker result than that of rival proppant maker Fairmount Santrol (NYSE: FMSA), which recently issued preliminary guidance showing volumes declining from 2.2 million in the year-ago quarter to between 1.9 million and 2 million last quarter. As a result, Fairmount Santrol's revenue decline was slightly better, at 48.5% year over year.

What management had to say 

On the company's fiscal first-quarter conference call, CEO Dave Powers offered his comments on current business conditions. He said:

All of our construction businesses performed very well during the first quarter. Simply put, we continue to see trend improvements for our cement, our concrete, our wallboard and our paper business. And the midterm outlook for volume and pricing remains good.

The continued strength of wallboard and paperboard sales is worth pointing out. Last quarter, the company saw a boost in sales due to customers pre-buying ahead of a March price increase. That said, sales trends remained healthy. This lines up with what rival USG (USG) noted on its conference call last quarter, when CEO James Metcalf said he was "encouraged that roughly three weeks into April, wallboard volumes have continued to outpace the prior year." In other words, customers were not just pre-buying product ahead of the price increases from Eagle Materials and USG, but because of an overall improvement in demand.

Looking forward 

In addition to reporting earnings, Eagle Materials announced a public offering of $300 million in senior notes. Initially, it plans to use the proceeds to pay down the borrowings under its revolving credit facility. However, that capital will increase the company's financial flexibility to pursue growth transactions, with Powers reminding investors on the call that his management team remains "highly interested in growing the heavy side of our business especially cement assets, given the long-term outlook for well-positioned U.S. assets which would match our investment criteria." Given that statement, it's clear the company remains focused on acquisition-driven growth.