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Eagle Materials (EXP 0.02%) reported excellent results for its fiscal third quarter on the back of increasing demand for construction products and building materials. The company set new fiscal third-quarter records for revenue and net income, thanks to record performance across its cement, paper, concrete, and aggregates business. The company sees even better days ahead, as a rebound in the oil and gas industry as well as continued robust cement demand should drive future results even higher.
Metric |
Fiscal Q3 2017 |
Fiscal Q3 2016 |
Year-Over-Year Change |
---|---|---|---|
Revenue |
$302.4 million |
$277.4 million |
9% |
Net earnings |
$56.4 million |
$45.8 million |
23% |
EPS |
$1.17 |
$0.92 |
27.2% |
Data source: Eagle Materials Inc.
Results were strong across both construction products and building materials:
On the company's fiscal third-quarter conference call, CEO Dave Powers offered the following comments on the quarter:
These strong results in part reflect the fact that Eagle is well positioned to benefit from the cyclic tailwinds supporting our major construction materials businesses, specifically cement and gypsum wallboard. The demand drivers for both of these businesses continue to gain strength. We have announced price increases across our cement markets, generally ranging from $8 to $10 per ton, and our previously announced wallboard price increase is being implemented now. We will be commenting on the success of these announced increases in the quarters to come.
As Powers noted, demand for construction materials is so healthy that the company can push through price increases. Those higher prices should lead to higher revenue and earnings even if volumes flatten out.
Powers also offered his outlook on the future:
Our outlook for energy-related materials, namely oil well cement and proppants, also continues to improve based upon the prospects for well count recovery and utilization intensity trends. Our growth strategy is focused on the heavy side of our businesses, i.e., cement, aggregates, and close adjacencies. We've been successful on substantially growing our cement capacity over the last few years, and we are excited about our geographic expansion into Ohio. We now expect to close on the acquisition of the Fairborn cement plant next month. These strategic moves serve us well and will pay substantial dividends in the future. U.S. cement demand is expected to exceed U.S. cement supply in the coming years. This should benefit an American heartland-focused cement producer like Eagle Materials.
Aside from higher prices, Powers sees several other important catalysts driving future results. First, the recovery in the oil market should lead to higher proppant sales, which could return that segment to profitability. Further, the company also sells oil well cement, which should see a rebound in sales. Finally, as mentioned, the company is close to closing its acquisition of Cemex's Fairborn plant, which will provide an immediate boost to its cement segment next quarter. That acquisition is coming at an excellent time, given the robust outlook for the cement market.