Martin Marietta Materials Q3 2025 Earnings Call Transcript

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Provided by Quartr
November 4, 2025

Key Takeaways

  • Positive Sentiment: Martin Marietta delivered record third-quarter results—aggregates revenues of $1.5B (+17%) and aggregates gross profit of $531M (+21%)—with continuing‑operations adjusted EBITDA up 22% to $667M and raised full‑year consolidated adjusted EBITDA guidance to a $2.32B midpoint.
  • Positive Sentiment: The rebranded Specialties segment (including the Premier Magnesium acquisition) produced all‑time quarterly revenues of $131M (+60%) and record gross profit of $34M, contributing meaningful incremental growth to the portfolio.
  • Positive Sentiment: Martin Marietta signed a Q4 asset‑exchange with Quikrete that would deliver roughly 20 million tons of aggregates (Virginia, Missouri, Kansas, Vancouver BC) plus cash in exchange for the Midlothian cement plant and certain Texas ready‑mix assets, intended to position the company for accelerated growth under SOAR 2030.
  • Positive Sentiment: Preliminary 2026 outlook calls for low single‑digit aggregates volume growth and mid‑single‑digit pricing with a targeted >250 bps price‑cost spread; management expects cost‑per‑ton growth to moderate (roughly ~2–2.5%), plans ~30% lower capital spending in 2026 versus 2025 midpoint, and highlighted $1.1B liquidity plus a 5% dividend increase.
  • Negative Sentiment: Downstream weakness persisted as "other building materials" revenues fell 10% to $351M and gross profit declined 17% to $54M, driven primarily by reduced asphalt and paving activity, which could pressure near‑term results in those businesses.
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Earnings Conference Call
Martin Marietta Materials Q3 2025
00:00 / 00:00

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Operator

Ladies and gentlemen, welcome to Martin Marietta's third quarter 2025 earnings conference call. All participants are currently in a listen-only mode. A question-and-answer session will follow the company's prepared remarks. As a reminder, today's call is being recorded and will be available for replay on the company's website. I will now turn the call over to your host, Ms. Jacklyn Rooker, Martin Marietta's Vice President of Investor Relations. Jacklyn, you may begin.

Jacklyn Rooker
Jacklyn Rooker
VP of Investor Relations at Martin Marietta Materials

Good morning, and thank you for joining Martin Marietta's third quarter 2025 earnings call. With me today are Ward Nye, Chair and Chief Executive Officer, and Michael Petro, Senior Vice President and Chief Financial Officer. As a reminder, today's discussion may include forward-looking statements as defined by United States securities laws. These statements relate to future events, operating results, or financial performance, and are subject to risks and uncertainties that could cause actual results to differ materially. Martin Marietta undertakes no obligation to publicly update or revise any forward-looking statements except as legally required, whether due to new information, future developments, or otherwise. For additional details, please refer to the legal disclaimers contained in today's earnings release and other public filings, which are available on both our own and the Securities and Exchange Commission's websites.

Jacklyn Rooker
Jacklyn Rooker
VP of Investor Relations at Martin Marietta Materials

Supplemental information is available both during this webcast and in the investor section of our website. It includes a summary of our financial results and trends, with third quarter and year-to-date bridges from continuing operations to consolidated results on slides four and five, respectively. As a reminder, the company's Midlothian Cement Plant, related cement terminals, and Texas Ready Mix Concrete Plants are classified as assets held for sale as of September 30, 2025. Their associated financial results are reported as discontinued operations for all periods presented. Our full year 2025 guidance summary on slide eight reflects continuing operations unless otherwise noted. Definitions and reconciliations of Non-GAAP measures to the most directly comparable GAAP measure are provided in the appendix to the supplemental information in our SEC filings and on our website.

Jacklyn Rooker
Jacklyn Rooker
VP of Investor Relations at Martin Marietta Materials

Today's earnings call will begin with Ward Nye, who will discuss our third quarter operating performance and our preliminary view for 2026, supported by key market trends. Michael Petro will then review our financial results and capital allocation. Ward will return with closing remarks. Please note that all comparisons are to the prior year's corresponding period. A question-and-answer session will follow. Please limit your Q&A participation to one question. I will now turn the call over to Ward.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Thank you, Jacklyn. Good morning, and thank you for joining today's teleconference. Martin Marietta delivered an exceptional third quarter, achieving record performance across both our aggregates and specialties businesses. These accomplishments reflect the enduring strength of our aggregates-led business model, the disciplined execution of our strategic priorities, and our steadfast commitment to safety. As detailed in this morning's release, third quarter highlights include several all-time quarterly records in our core aggregates product line, reflecting strong year-over-year improvement. Aggregates revenues of $1.5 billion. A 17% increase. Aggregates gross profit of $531 million, a 21% increase. Aggregates gross profit per ton of $9.17, a 12% increase, and aggregates gross margin of 36%, an increase of 142 basis points. Our specialties business also delivered outstanding performance, achieving record quarterly revenues of $131 million, a 60% increase, and third quarter record gross profit of $34 million, a 20% increase.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

As announced at our Capital Markets Day, we've rebranded the former magnesium specialties business to Specialties, a name that better reflects the broader portfolio of specialty products we provide within that segment, all of which are rooted in our core competencies: mining, crushing, and processing rock. These strong results reflect robust organic growth, complemented by contributions from Premier Magnesium acquired at the end of July. Importantly, and I'm extremely proud to report, this outstanding financial performance coincided with our teams delivering the best year-to-date safety performance in our company's history, as measured by both total and lost-time incident rates, a testament to our culture of world-class safety and operational excellence. Looking at the quarter holistically compared with the prior year, revenues from continuing operations were $1.8 billion, a 12% increase. Revenues, inclusive of discontinued operations, were $2.1 billion, a 10% increase.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Adjusted EBITDA from continuing operations was up 22% to $667 million. Consolidated Adjusted EBITDA, inclusive of discontinued operations, was up 15% to $743 million. Our earnings per diluted share from continuing operations were $5.97, an increase of 23%, and total earnings per diluted share, inclusive of discontinued operations, were $6.85, an increase of 16%. Building on this momentum, we're raising our full year 2025 consolidated Adjusted EBITDA guidance to $2.32 billion at the midpoint, driven by strong performance in our core aggregates product line and October daily shipment trends. As outlined in today's earnings release, the revised consolidated Adjusted EBITDA guidance includes results from both continuing operations and discontinued operations. On August 3, we entered into a definitive agreement with Quikrete Holdings Inc., or Quikrete, for the exchange of certain assets. As part of the transaction, which is expected to close in the fourth quarter of 2025.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Martin Marietta would receive aggregates operations producing approximately 20 million tons annually in Virginia, Missouri, Kansas, and Vancouver, British Columbia, and cash proceeds. In exchange, Quikrete would receive the company's Midlothian Cement Plant, related cement terminals, and certain Texas Ready Mix Concrete assets. Following the close of this portfolio-shaping transaction, we will be optimally positioned to accelerate into our next phase of growth under SOAR 2030. Looking ahead to 2026, we expect continued resilience in our aggregates business, supported by sustained infrastructure investment, solid heavy non-residential demand, particularly from accelerating data center development, and an eventual recovery in residential construction. Our preliminary 2026 outlook reflects low single-digit aggregates volume growth and mid-single-digit pricing gains. As always, Martin Marietta's industry-leading teams remain focused on what we can control, executing our strategic plan, which includes upholding world-class safety standards and delivering attractive price-cost spread economics regardless of underlying demand trends.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Turning to end market trends, infrastructure continues to benefit from sustained federal and state investment. According to the American Road and Transportation Builders Association, or ARTBA, the value of state and local government highway, bridge, and tunnel contract awards, a leading indicator of future product demand, increased 10% year-over-year, reaching $128 billion for the 12-month period ended September 30, 2025. While the Infrastructure Investment and Jobs Act, or IIJA, is scheduled to expire in September 2026, over 50% of highway and bridge funding is still to be invested, providing meaningful tailwinds as reauthorization discussions begin. Moreover, at July's infrastructure conference, U.S. Transportation Secretary Sean Duffy reaffirmed the administration's commitment to long-term planning, funding stability, and accelerated project delivery.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

These priorities, combined with the bipartisan legislative support and healthy Department of Transportation budgets across our top states, reinforce our confidence in the durability of product demand within our most aggregates-intensive countercyclical end market. While intermittent government shutdowns, or their immediate aftermath, may delay certain administrative functions, core highway, street, bridge, and road construction activities typically proceed uninterrupted, supported by stable funding from the Highway Trust Fund and advanced appropriations. Heavy non-residential construction demand remains steady across our key geographies, underpinned by sector-specific dynamics ranging from rapid expansion in data centers to a recovery in warehousing and distribution and early-stage momentum in energy and advanced manufacturing. Data center development continues to accelerate, with Texas emerging as a national leader in hyperscaler activity, highlighted by more than 100 data centers currently under construction. Meanwhile, warehouse and distribution activity is rebounding from a cyclical bottom as vacancy rates normalize.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Investment in the energy sector is gaining traction, particularly along the Gulf Coast, where aggregates-intensive liquefied natural gas, or LNG, projects that were previously paused are advancing following the resumption of federal permitting. Additionally, the reshoring of pharmaceutical manufacturing is another emerging bright spot, bolstered by the reconciliation bill's enhanced investment and R&D tax credits. A few notable examples within Martin Marietta's footprint include Eli Lilly's $6.5 billion facility in Houston and two large projects in Raleigh, including Novo Nordisk's $4.1 billion expansion and Johnson & Johnson's $2 billion expansion. Land availability, proximity to highways, ports, and rail infrastructure, and business-friendly regulatory environments remain key factors influencing the location of large-scale, well-funded, heavy non-residential construction projects.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

As shown on slide 12 of our supplemental information, Martin Marietta's leading presence along major transportation corridors in high-growth markets positions us to deliver the right products at the right time in the right places. While affordability constraints continue to hinder near-term residential construction activity, moderating mortgage rates suggests a gradual path toward normalization. Encouragingly, in October, the National Association of Home Builders' Wells Fargo Housing Market Index, or HMI, a key indicator of home builder confidence and overall health of the housing market, rose to its highest level since April, driven by a nine-point increase in the index's measure of expected single-family home sales over the next six months, the strongest reading since January.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Historically, light non-residential construction demands tend to follow residential development, and although more sensitive to interest rates, this activity has demonstrated relative resilience during this most recent housing cycle due to significant population inflows into our key Sunbelt markets. That said, we fully expect light non-residential activity to accelerate as single-family housing recovers. I'll now turn the call over to Michael Petro to discuss our third quarter financial results. Michael.

Michael Petro
Michael Petro
SVP and CFO at Martin Marietta Materials

Thank you, Ward, and good morning, everyone. The continuing operations building materials business, which is now comprised of aggregates, asphalt, and paving, and our Arizona Ready Mix product lines, posted revenues of $1.7 billion, a 10% increase, while gross profit increased 16% to $585 million. Gross margins improved 191 basis points to 34%. As strong outperformance in aggregates more than offset weakness in downstream products, which are now classified as other building materials. As Ward noted, our core aggregates business achieved records across most financial metrics in the third quarter. Revenues increased 17% to $1.5 billion, driven by a balanced mix of 8% price and 8% volume growth. Gross profit increased 21% to $531 million, while gross margins expanded 142 basis points to 36%. As strong pricing and a normalized weather shipment cadence in the Southeast and Texas more than offset higher freight depreciation and general inflationary impacts.

Michael Petro
Michael Petro
SVP and CFO at Martin Marietta Materials

As implied in our revised full-year aggregates gross profit guidance, we expect cost per ton growth to moderate in the fourth quarter. A trend that we expect to continue in 2026 as cost-flexing measures implemented earlier this year take effect. Other building materials revenues decreased 10% to $351 million, and gross profit decreased 17% to $54 million, primarily the result of reduced asphalt and paving revenues. Our specialties business delivered all-time quarterly record revenues of $131 million, and gross profit increased 20% to $34 million, inclusive of a non-recurring $5 million purchase accounting headwind. This strong performance was driven by higher pricing, increased shipments across all product lines, and effective cost management. Additionally, the results benefited from approximately two months of contributions from the Premier Magnesium acquisition. Turning now to capital allocation.

Michael Petro
Michael Petro
SVP and CFO at Martin Marietta Materials

At our September Capital Markets Day, we reaffirmed our disciplined approach to M&A, emphasizing efficient synergy delivery and the importance of maintaining a strong balance sheet with an investment-grade credit rating. The Quikrete asset exchange would serve as a compelling example. By leveraging Section 1031 of the Internal Revenue Code and capitalizing on recently enacted bonus depreciation provisions, we thoughtfully structured this transaction to minimize cash tax leakage. Importantly, our $1.1 billion in total liquidity as of September 30 provides enhanced balance sheet flexibility to pursue M&A opportunities within what remains an active pipeline. Our commitment to financial discipline extends to capital spending, where we remain focused on balancing growth investments with free cash flow conversion.

Michael Petro
Michael Petro
SVP and CFO at Martin Marietta Materials

Following several years of elevated capital expenditures, we expect an approximate 30% reduction in 2026 capital investments as compared to the 2025 guidance midpoint, which reflects a sustainable level aligned with the ongoing needs of the business. Lastly, and consistent with our capital allocation priorities, we remain committed to returning capital to shareholders. During the third quarter, our board of directors approved a 5% increase to our quarterly cash dividend paid in September, demonstrating confidence in the durability and sustainability of our company's future growth and free cash flow generation. We have now returned $597 million year-to-date and $3.9 billion since the announcement of our share repurchase program in 2015 through both dividends and share repurchases. With that, I will turn the call back over to Ward.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Thank you, Michael. We're extremely proud of the company's exceptional safety, operational, and financial performance through the first nine months of 2025. This momentum, combined with portfolio enhancements throughout SOAR 2025 and the launch of SOAR 2030 at our Capital Markets Day, reflects our unwavering commitment to disciplined growth, operational excellence, and sustainable value creation. With a streamlined portfolio, a resilient aggregates-led platform, a complementary specialties business, and a strong financial foundation, we're well-positioned to deliver our updated full-year 2025 consolidated Adjusted EBITDA guidance. More importantly, we remain focused on building a business that consistently outperforms across cycles and delivers compounding value for our shareholders over the near, medium, and long term. If the operator will now provide the required instructions, we'll turn our attention to addressing your questions.

Operator

Thank you. And we'll now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one a second time. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. To be able to take as many questions as possible, we ask that you please limit yourself to one question. Again, it is star one if you would like to join the queue. And our first question comes from the line of Kathryn Thompson with Thompson Research Group. Your line is open.

Kathryn Thompson
Analyst at Thompson Research Group

Good morning, and thank you for taking my question today. I wanted to focus on the balance of your aggregate pricing and volumes. Your ASP was solid. You're able to maintain for the year. Could you sort and also for volumes also had. I'm optimistic into the year. Could you sort out the difference between total and organic pricing for the quarter? And could you do the same for volumes and how we should think about both going forward with the balance of organic versus total? Thank you.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Kathryn, thanks for the question. Nice to hear your voice, and thank you for being with us today. Yeah, I can break that down for you. I mean, look, I was really pleased with the overall pricing and volume. I mean, it's one of those quarters where it's kind of a square meal, right? It's eight and eight, so those are easy numbers to remember. Look, here's what I'm enthusiastic about. Pricing, as reported, was up 8%. Organic was up 7.9%. And I think what a lot of people would have thought looking at it was, look, the 8% had to be helped a lot by the acquisition activity. The fact is we're seeing very good solid organic activity as well. And if I break it down and look at the East Group and the West Group, both of those performed extraordinarily well.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

So it wasn't as if it was being captured just in one part of our geography. The other thing that I'll share with you is if we look also at the mix of product going out, this was actually a pretty heavy base quarter. So if you think about it, that really should have been a product mix headwind to what we were doing. I've long said when I see base going out, it gives me a lot of confidence in the future because what I know is if we're putting base rock down, at some point, somebody's putting clean stone on top of it in the form of either ready-mix concrete or asphalt and paving. Now, relative to the shipments themselves, again, they were up 8% for the quarter. Organic was up 5.5%. So again, I think broadly in the realm that we would have thought.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

The fact is we had, I wouldn't say favorable weather. I would just think we had more normalized weather in the quarter, and the business did exactly what we thought it would. But Kathryn, thank you for the question. I hope that was responsive.

Kathryn Thompson
Analyst at Thompson Research Group

That's helpful. Thanks so much. I'll hop back into queue.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Thank you.

Operator

Our next question comes from the line of Trey Grooms with Stephens. Your line is open.

Trey Grooms
Trey Grooms
Equity Research Analyst at Stephens

Good morning, Ward and Michael. Hope you're doing well.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Yes, sir. Trey, how are you?

Trey Grooms
Trey Grooms
Equity Research Analyst at Stephens

I'm doing excellent. Thank you, Ward. So. Looking at if we could maybe look at the cost side of things, you mentioned a few things that were going on in Q3. But it looks like you're expecting an improvement in price costs in the fourth quarter. If maybe you could talk about some of the drivers there here in the fourth quarter. And then, Michael, you mentioned. That you expect this trend to continue going forward. Is there any early thoughts on how you're thinking about. The price cost side of the equation as we look into next year? Thank you.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Same point. Let me take the first part of that, Trey, and Michael will come back and talk a little bit about the spread notion for next year. So if we look at the overall cost performance for the quarter, what I would say is the pricing performance is really good. I would say the cost performance was okay. I mean, I'm not disappointed in the cost performance. The fact is it can get better. And if you look at what we're implying for the rest of the year, what you're going to see is really an implied Q4 cost performance of around 2% versus what you saw this quarter. Now, the fact is if we take a look at this quarter and start breaking it down, on what the drivers were, the drivers were largely threefold. What was happening with personnel?

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Obviously, what's happening with DD&A simply due to the investments we've made. And then a component that we have that's going to be different than many is the freight portion of it because, as you know, we've got more long haul in our profile than anybody else does. In fact, we're shipping by rail probably 2X our largest competitor in that dimension. So again, if we just pulled the rail piece out of it all by itself, it would probably take that cost profile down to about 4%. But again, the Q4 implied gives you a sense of, have we put in some cost containment measures? Yes. Do we intend to see that come through for the balance of the year? Yes. And do we think that's going to dribble over into next year in a meaningful way? The answer, again, is yes.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

And with that, let me go back to Michael for the portion of your question relative to price cost spread.

Michael Petro
Michael Petro
SVP and CFO at Martin Marietta Materials

Yeah. Thanks, Ward. And Trey, thanks for the question. I think the best way to get your arms around 2026 and really over the next five years is consistent with what we said at our Capital Markets Day, where we expect to be able to deliver a price cost spread in excess of 250 basis points. We certainly believe that that would be the case next year. We don't see anything either on the price or the cost side that would give us concern there. In fact, what I would say is that deceleration in Q4 and the kind of 2.5% cost per ton growth range, that's probably a good number to pencil in for next year as a starting point.

Michael Petro
Michael Petro
SVP and CFO at Martin Marietta Materials

And we have our mid-single digit pricing guide out there, so that should put you in that 250 basis point zip code coming out of the gate and SOAR 2030.

Trey Grooms
Trey Grooms
Equity Research Analyst at Stephens

Yep. Okay. Got it. That's all very helpful. I'll leave it there. Thanks again.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Thank you, Trey.

Operator

Our next question comes from the line of Anthony Pettinari with Citigroup. Your line is open.

Anthony Pettinari
Anthony Pettinari
Research Analyst at Citigroup

Good morning.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Hey, Anthony.

Anthony Pettinari
Anthony Pettinari
Research Analyst at Citigroup

I was wondering, hey, I was wondering if you could talk a little bit more about maybe the volume cadence for the three months of the quarter and then maybe into October, November, if you've seen any impact from government shutdown or anticipated any impact if it keeps going? And I'll leave it there.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Anthony, sure. I'll give you some broad strokes on it. Michael can come back and give you a little bit more detail. But what I would say to you overall is we saw just a good, steady, solid performance as we went all the way through the quarter. What's worth remembering, and I think this is really important, last year was a monster October for us. And it was a monster October because, as you will recall, we had a lot of weather in Q3 last year. And in particular, we had four hurricanes. And we simply didn't have that this year. And what I would have thought was, given what October was last year, that was a big mountain to climb in October this year. And obviously, we'll talk more about October with specificity when we report Q4, but I'll put it this way.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

We were not at all disappointed in October this year. So again, if you want to get a sense of what the overall quarter looked like, Michael can give you a little bit more detail as we look at month by month.

Michael Petro
Michael Petro
SVP and CFO at Martin Marietta Materials

Yeah. So as we said, I believe last quarter, we expected it to be the tale of weather comps as we marched through the months. We thought July was an easy weather comp. We thought August was going to be a little bit more difficult given some of the carryover work in 2024 from that July weather-impacted month provided a pretty difficult comp in August. And then we said September was an even easier weather comp than July. We saw that play out fairly consistent with our expectations. That being said, I think what's important is the highest daily shipment trend of all three months was in September. So that gives you a little bit of a sense of the momentum that we saw carrying over into October.

Anthony Pettinari
Anthony Pettinari
Research Analyst at Citigroup

Great. Great, and any impact from shutdown?

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Oh, I'm sorry. Yeah, you did ask that. Yeah, the fact is this portion of our business from a shutdown perspective performs hugely resiliently, so if you think about federal DOT, how they're going to work, highways, bridges, roads, and streets, because of the way funding flows through on that, typically it's not impacted by shutdowns. And of course, the states continue to be in a really attractive place, at least in the geographies in which we're operating, and of course, the states continue to be in a really attractive place, at least in the geographies in which we're operating, so while I do ache for the different businesses that are struggling mightily as they go through the shutdown, it's one more factor of the resilience that we tend to have in this business.

Anthony Pettinari
Anthony Pettinari
Research Analyst at Citigroup

Okay. That's great. I'll turn it over.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Thanks, Anthony.

Operator

Our next question comes from the line of Phil Ng with Jefferies. Your line is open.

Phil Ng
Phil Ng
Analyst at Jefferies

Hey, guys. Congrats on another strong quarter. Ward, I'm curious about what you're seeing on the bookings and backlogs, how that has progressed over the course of the year. I'm particularly interested on non-res as we look at the 2026. Heavy's been really strong. Light's been a little weaker, but you sound a little more constructive on commercial. So I'm sorry, warehouse. Is that enough to kind of flip things positive? And how has momentum on the infrastructure side progressed as well?

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Phil, thanks for the question. I would say several things. One, the infrastructure piece of it that you mentioned last should continue to be really constructive going into next year. I mean, if we think about the notion that we've still got 66% of total highway and bridges cumulative obligations to go, half of the dollars still are yet to be invested on the public side. That should be really constructive for a while. The other piece of it that I think is worth noting. If we're looking at our top 10 states and you're looking at state DOTs, year-over-year, as we go into 2026, they're up between 6% and 7%. So if we look at California, that's up 6%. Texas is up double digits. Minnesota, which is an important state for us, is nicely up double digits. Georgia up 7%.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

So again, what we're seeing on public is attractive. But I would draw your attention to slide 12 today in the supplemental slides because I think that really gives you a good visceral take of what we see going on relative to non-res activity, particularly on the heavy side. And we listed out in there across geographies what we're seeing relative to data centers, what we're seeing relative to warehouses and distribution, and what we're seeing relative to manufacturing. I will tell you this. I've always asked my team, "Hey, do me a favor. Call me with good news." Because typically, I hear from people when things are more challenging that occur.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

I'm getting more texts and more emails than I ever would have thought at this time of year on the type of bidding activity that they're seeing right now in geographies that matter a lot to us and on projects that I think can be very impactful going into next year. So I'm trying to give you anecdotally and factually, Phil, what you were talking about relative to what's going on with public, what's going on with heavy non-res. And again, part of what I've been taken by is actually how well light non-res has held up through the cycle, despite the fact that housing has not been in a particularly good place. Look, if we continue to see constructive activity relative to interest rates, etc., on housing, I think when we get into half two next year, it's not that I think housing is going to be on fire.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

It's going to start to recover. And as we see that combined with what I think is a very attractive public sector, a good, healthy, heavy non-res, I think that's going to be awfully constructive, number one, to single-family housing, and number two, even bolster up what has been a more resilient light non-res than I would have thought.

Phil Ng
Phil Ng
Analyst at Jefferies

Okay. Great color. Really appreciate it. Thank you.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Thank you, Phil.

Operator

Our next question comes from the line of Angel Castillo with Morgan Stanley. Your line is open.

Esther Osinaiya
Esther Osinaiya
Equity Research Associate at Morgan Stanley

Hey, this is Esther Osinaiya on for Angel. My question is, what's driving the stronger seasonal norm quarter? And given that, does that suggest that the exit rate into next year is stronger than the preliminary guide implies?

Michael Petro
Michael Petro
SVP and CFO at Martin Marietta Materials

Are you talking about the exit rate in aggregate pricing or gross profit?

Esther Osinaiya
Esther Osinaiya
Equity Research Associate at Morgan Stanley

We're talking about pricing or both. Yeah.

Michael Petro
Michael Petro
SVP and CFO at Martin Marietta Materials

Yeah, so I think a few things. On the cost side and gross profit in particular, we are seeing a nice sequential change that's better than the sequential change we saw last year from Q3 to Q4, and a lot of that is driven by those cost measures that we've set in the prepared remarks that we implemented in Q2 and Q3. We're going to see those start to bear fruit really in Q4 in earnest, so you see that flowing through, so that's number one, and then on the pricing side, that's just consistent with remaining disciplined in that regard, so the exit rate that you see there, we feel pretty confident about that.

Michael Petro
Michael Petro
SVP and CFO at Martin Marietta Materials

We still think, as far as pricing guide for next year, the mid-single digits is the right way to think about it, so some of that will be a little bit of carryover, but by and large, that's going to be a lot of what we do relative to January 1 increases.

Esther Osinaiya
Esther Osinaiya
Equity Research Associate at Morgan Stanley

Okay. Thank you.

Operator

Our next question comes from the line of Adam Thalhimer with Thompson Davis. Your line is open.

Adam Thalhimer
Analyst at Thompson Davis

Hey, good morning, guys. Great quarter, particularly on the pricing growth.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Thank you.

Adam Thalhimer
Analyst at Thompson Davis

Ward, I wanted to ask you, sorry if it's been covered, but I was hoping you could comment more on what you've seen in the public sector and specifically DOT work, how confident you are in 2026, and curious if the DOTs are relatively consistent in growing next year or if there's some variability.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Adam, thanks for the question. No, it's relatively consistent across our DOTs. So keep in mind, when we began our SOAR process back in 2009 and 2010, one of the areas in which we were most focused is building our businesses in states that were in a really good fiscal condition because we felt like that was going to be vital for them to be able to match what the federal government is putting out. Another big driver for us was population trends and places where we could have leading positions. And so if you think about that as being the architecture around which we tried to build a business. Again, if we go back and take a look at these top 10 states, I think I've indicated top 10 total are up about 6.8% year-over-year. That's a really attractive number.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

There's nothing that we're seeing in our leading states right now. That gives us any concerns about where they're going to be. Equally, as I mentioned, the highway, bridge, and tunnel contract awards basically increased to $128 billion for the 12-month period ending September 30, 2025. So the work continues on the projects supported by the federal investment and the state funding increases. If we take a look at equally what's happened in a number of our states, North Carolina is a good example over the last several years, they've come up with additional funding programs as well. So if we go back and look at what the NC First Commission did several years ago, basically saying, "Look, to get our roads from mediocre to good," which doesn't sound like it was a stretch, we recognize that there was a multi-billion dollar investment that needed to be made over time.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

And part of what our General Assembly did in this state, and by the way, other states have done the same thing, is started dedicating portions of sales tax to transportation because the notion was nothing ends up on a store shelf. If it's not using infrastructure in that state. So Adam, as we look at what I think is happening federally, clearly IIJA is going to be strong going into next year. But I equally think, and I think this is important, I believe we will continue to see a nice successor bill come behind IIJA before it expires by its own terms next September. And again, I mentioned the dialogue that Secretary Duffy had shared a couple of months ago relative to what their continuing priorities are going to be.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

So if you look at this quarter, part of what you'll see is infrastructure was around 37% of the product that went out of our gates. And if you look over time, that's continuing to build up to that, let's call it 40% number, that I think feels like a pretty good percentage for infrastructure to be. Now, that said, we also saw growth in heavy non-res. So that went up to 35%. But again, if we're looking for what literally is going to be the ballast in the boat, Adam, I think it's going to continue to be public. I think that's going to be a constructive show federally. I think it's going to be a compelling show relative to Martin Marietta states.

Adam Thalhimer
Analyst at Thompson Davis

Good color. Thanks, Ward.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Thanks so much, Adam.

Operator

Our next question comes from the line of Garik Shmois with Loop Capital. Your line is open.

Garik Shmois
Garik Shmois
Analyst at Loop Capital

Oh, hi, thanks. I had a follow-up question on pricing. Can you speak to if you're seeing any mixed impact on pricing, either product or geographic? And also, we heard from a competitor recently saying that the pricing in their backlog is accelerating. I was wondering if you're seeing something similar.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Garik, thanks for the question. Yeah, I would not say that we had any tailwinds relative to product mix, for example. I did mention earlier that if we're looking at the single largest growth of the products, it was going to be in basestone. And as you know, it's not unusual for basestone to be 20%, 25%, 30% lower in ASP than a cleanstone. And the reason that I call that out is that basestone is going down. Two things are happening, Garik. Number one, it's relatively new construction, which we're excited by. It also means that at some point, the cleanstone will come on top of that because you're going to have either asphalt or concrete going on top of the basestone. So I think if anything, we would have had a headwind relative to what was going out.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Relative to geographic mix, really, there was not a significant headwind on that either. I mentioned that overall pricing was 8%. Organic was still 7.9%. The East Group had healthy pricing. Actually, the West Group had healthier pricing than the East, which makes some sense to me because historically, West Group pricing has been lower, at least overall. So there's some catch-up that needs to come from that. But I think those are the primary moving parts that we've seen, Garik. But did that answer your question specifically?

Garik Shmois
Garik Shmois
Analyst at Loop Capital

No, it did. Thank you, and just anything to call out on the backlog and how pricing looks there?

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Again, we'll talk more about next year when we get into it. But as I mentioned before, I'm seeing much more activity right now than I've seen for a while in energy. I'm seeing continued attractive activity relative to data centers. And much of those are going to be location-driven. And the fact is we built our business along these major corridors, whether it's road, rail, or port. And I think if you think about the momentum, that should give us going into next year. More to come, but I think it should be. I don't think you'll be disappointed, Garik.

Garik Shmois
Garik Shmois
Analyst at Loop Capital

No, that sounds good. Thanks, and best of luck.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Thank you.

Operator

And our next question comes from the line of Keith Hughes with Truist. Your line is open.

Keith Hughes
Keith Hughes
Analyst at Truist

Oh, thank you. The specific question. But once you complete the deal with Quikrete, excuse me, with Quikrete, will that change the SG&A spending? Does any of the SG&A costs go with the business?

Michael Petro
Michael Petro
SVP and CFO at Martin Marietta Materials

Yeah. No, it's almost a pretty clean carve-out in that regard. So there will be some retained SG&A that used to support that business. But the EBITDA that we're showing in discontinued operations, that assumes we're retaining the corporate SG&A that supported that business.

Keith Hughes
Keith Hughes
Analyst at Truist

Will there be any mixed impact within aggregates next year, just based on what you're getting?

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

The fact is there probably will be some mixed impacts. You'll have a couple of things if you think about it, Keith. There'll be some geographic mix because we're picking up some businesses in the central. And that tends to be, for example, a little bit lower than businesses are in the east. We're picking up some businesses in Virginia. But overall, it'll be an optical headwind, but we also think that provides organizational opportunity.

Keith Hughes
Keith Hughes
Analyst at Truist

Okay, and the guidance you gave for the preliminary guidance for 2026, I assume those are organic numbers, excluding mix and volume out?

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

That's correct.

Keith Hughes
Keith Hughes
Analyst at Truist

Okay. Thank you.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Thank you, Keith.

Operator

And our next question comes from the line of Brian Brophy with SunTrust. Your line is open.

Andrew Foster
Analyst at SunTrust

Hey, guys. This is Andrew on for Brian. Thank you for taking my question. I'm wondering if you could provide an update on how you're thinking about the timing of the rollout of the Precise IQ pricing tool next year and to what extent benefits from that may be captured in the mid-single-digit pricing guidance or if that's more of a 2027 story. Thanks.

Michael Petro
Michael Petro
SVP and CFO at Martin Marietta Materials

Yeah, no. So we should have Precise IQ, the quoting tool, in all of our sales team's hands by mid-year next year. It's already effectively rolled out here in the east. But underlying the Precise IQ is really the pricing algorithm, and that engine has been built. That supports both fixed-based and quoted pricing. So we are in our mid-single-digit guide incorporating that for what we ultimately go out with January 1 relative to fixed-based. We expect more upside from Precise IQ really on the quoting side to flow through more in 2027.

Andrew Foster
Analyst at SunTrust

Thanks. I'll leave it there.

Operator

Our next question comes from the line of David MacGregor with Longbow Research. Your line is open.

David MacGregor
David MacGregor
Senior Analyst at Longbow Research

Yes, sir. Good morning, everyone. Congratulations, Ward, on a great quarter.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

David, thanks so much. Good to hear your voice.

David MacGregor
David MacGregor
Senior Analyst at Longbow Research

Yeah. I guess I wanted to just get your thoughts around mid-year aggregates pricing and what did you take away from this year that was maybe a little bit different from the mid-year experience last year or in prior years? And also, just given all the pressures in downstream markets right now, is there any sort of pushback on pricing that—I mean, are these downstream problems constraining your pricing at all?

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

David, thanks for the question. I would say several things. I'm not sure I was terribly surprised by mid-year pricing this year, but we're putting up really good results, but we're not really in a robust volume environment. We saw pretty reasonable volume growth, but it was on a pretty weather-challenged quarter last year, so what I would tell you is this is what we're able to do in a relatively static volume environment that I think is, number one, going to improve, so did that surprise me on what we saw in mid-years this year? Not really, because what I anticipated was we would see it primarily, and by the way, we did, in areas where we had had new M&A, where we were trying to bring businesses at least on a trajectory basis up to what we would have expected in our heritage business.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Now, as we look into the new year, and again, I think going back to some of the dialogue we've had early in the call, I think public's going to continue to grow into next year. What I'm seeing on heavy non-res is actually pretty attractive right now, David, and if we're right that we start seeing more activity in single-family in the second half of next year, I think that actually portends pretty well for what mid-years could look like next year. Obviously, we will talk more about that when we get into the year, and of course, part of what we're getting ready for will be the price increases that we'll put out in January, but if you just look at foundationally what happened this year and what I anticipate broadly happening next year, I think from a mid-year perspective, it's going to be pretty constructive.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Keep in mind, if we really think about most of our customers in these respects, they're most focused on making sure that everybody is treated fundamentally fairly on what's going on, and we assure ourselves that that's exactly where they are, so I don't think we're going to have undue pressure in that dimension.

David MacGregor
David MacGregor
Senior Analyst at Longbow Research

On the downstream markets, any pressure there that you're feeling?

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Yeah, not particular markets. I mean, this has been an interesting year. Minnesota had a much more constrained budget this year, and they had an extended winter. So really, if I'm looking at our asphalt business this year, and Minnesota's odd for us because part of it, that's an FOB business for us, really, David. We're not doing lay down in that state. And if you look at their budget next year compared to this year, it's a fundamentally different budget. And if you think about the downstream business for us, they're really pretty narrow. I mean, it's going to be, what are we doing with FOB asphalt in Minnesota? What are we doing with lay down really in Colorado? And what are we doing with degrees of ready mix in Arizona? In many respects, that's the show.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

And of course, we had sold some asphalt businesses in California earlier in the year. And if you're just looking year-over-year, that's a big swing in the delta. So if you didn't take that into account, you would have a sense that the downstream businesses are actually suffering more than they are. So that actually buffers it pretty nicely.

David MacGregor
David MacGregor
Senior Analyst at Longbow Research

Great. Look forward to following up with you after. Thanks, Ward.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Thank you, David.

Operator

Our next question comes from the line of Mike Dudas with Vertical Research Partners. Your line is open.

Mike Dudas
Equity Research Analyst at Vertical Research Partners

Good morning, Jacklyn. Michael Ward.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Hi, Mike.

Mike Dudas
Equity Research Analyst at Vertical Research Partners

Michael mentioned this prepared remarks CapEx trending next year. I mean, if you could shed a little bit more light on that. You talked a lot at your investor day about automation and the investment there, how that jives with that type of spending comment. And then just as you—and to follow up on the balance sheet—on a pro forma basis, if this transaction closes at the Q4, any meaningful changes to the balance sheet we should be thinking about? Thank you.

Michael Petro
Michael Petro
SVP and CFO at Martin Marietta Materials

Yeah. I guess first on CapEx. What we said is the last two years, for various reasons, have been at elevated levels. So really, we just believe in 2026, we're returning to what we would say is more normalized levels, which is roughly 25% of EBITDA for next year or maybe modestly below that. This year had some opportunistic land purchases, and the prior year had the acquisition that was treated as CapEx for accounting purposes. So really, no fundamental change in how we're investing in the business. It's just coming off of two years of a relatively elevated comp. We don't think we do any harm to the business in terms of pulling it back to that level. In fact, if we needed to, we could flex CapEx further if necessary. Relative to the balance sheet, the transaction is relatively balance sheet neutral.

Michael Petro
Michael Petro
SVP and CFO at Martin Marietta Materials

So no real change in leverage or otherwise once it closes.

Mike Dudas
Equity Research Analyst at Vertical Research Partners

Thank you, Mike.

Michael Petro
Michael Petro
SVP and CFO at Martin Marietta Materials

Thank you.

Operator

And our next question comes from the line of Ivan Yi with Wolfe Research. Your line is open.

Ivan Yi
Ivan Yi
Analyst at Wolfe Research

Good morning. Thanks for taking my question. Just wanted to go back to aggregate pricing, which was up double digits in 2022, 2023, and 2024. Can you return to those levels? I guess what needs to happen for you to raise your mid-single-digit pricing increase guidance for 2026? Thank you.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

I would thank you for the question. I guess I would say several things. Obviously, there was a lot of inflation and a very price-sensitive world that we were in for a period of time when we were seeing double digits. And part of what we anticipated is we would be exactly where we are now when we returned to what we think was a more normalized time relative to inflation and otherwise. I think to your point. Look, if volumes really start taking off in notable ways, at least based on history, pricing tends to follow that. So that's how I would think about that.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

But again, we tried to lay a lot of that out with degrees of clarity at our capital markets day, talking about what we thought the drivers had been over the last several years, what they thought, what we believe they are today, and what we think they can be going into the future. We obviously do believe that the overall commercial aspects of the business have changed pretty considerably over time. And that really is taken up into what we gave as the guide for this year and the preliminary guide for next year. And I think your swing factor is going to be what happens with volume. And if volume is moving, if you got products that tend to be tight in geographies, that's traditional economics at play. So that's how I would think through it, Ivan.

Ivan Yi
Ivan Yi
Analyst at Wolfe Research

Thank you.

Operator

And our final question comes from the line of Judah Aronovitz with UBS. Your line is open.

Judah Aronovitz
Judah Aronovitz
Analyst at UBS

Hey, thank you. Good morning.

Michael Petro
Michael Petro
SVP and CFO at Martin Marietta Materials

Good morning.

Judah Aronovitz
Judah Aronovitz
Analyst at UBS

As you sit here today, thinking about 2026, I guess, what are the biggest uncertainties you have? And how do those questions or uncertainties compare to last year at this time? And then what's your confidence in sustained growth and gross profit per ton on aggregates? Is double-digit growth, I guess, reasonable at this point? Thank you.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

So I would say several things. One, I think, is I'm thinking about 2026 versus 2025. I actually feel better going into 2026 than I did 2025. And I would say that for several reasons. One, we're seeing the work continue to pull through on IIJA, number one. So that should continue to be very attractive. Number two, we're seeing where the state DOT budgets are coming in. And again, they're coming in at very attractive levels in most instances, up nicely. And again, that's going to be high 30% of our volume right there by itself. If we're also looking at what I continue to think is a constructive and growing segment that we talked about in non-residential, particularly on the heavy side.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

And one piece of it we haven't spoken of on today's call that I think is really important will be what we will watch on the emerging energy plays that we think are almost destined to come through. If I'm looking at what Texas is saying they're going to have to do to meet this incredible AI explosion that's occurring in that state. And Michael talked about that really becoming a landing spot for so many hyperscalers today. And the fact is, we look in our backyard in North Carolina, there are 91 data centers in the state. Duke Energy is already talking about on a percentage basis what they're going to have to change in North Carolina. But the fact is, North Carolina and Texas are not alone in that respect. So again, if I think about public, very constructive.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

If I think about non-res on the heavy side, it continues to grow. And again, I take you back to that slide 12 and the supplemental slides. And then what we're doing today in this business is doing it on the back of a non-excuse me-on a residential market that is very, very muted. And if you go back over time and you really want to track volumes, and if there's one single thing that you can tend to track it with, it's what's happening relative to single-family housing. Not that that's a huge consumer of stone, but it's everything else that brings along with it, including the light non-res. So we came into this year with very low expectations of housing. And by the way, those low expectations were fully met this year.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

I think we're going to go into next year and have a much more constructive housing market in half to probably building into 2027. So again, Ivan, what you're asking me is coming into the year, how did it feel? Exiting the year, how does it feel? And what does that look like on a comparative basis on what we think 2026 is going to be? I feel better about 2026 than I did 2025 coming into the year. So I hope that's responsive.

Judah Aronovitz
Judah Aronovitz
Analyst at UBS

Okay. Thanks. And just on the gross profit per ton on aggregates, I guess, how would you know? Is double-digit growth reasonable to expect at this point?

Michael Petro
Michael Petro
SVP and CFO at Martin Marietta Materials

Yeah. I would encourage you to think about the price-cost spread that we talked about at 250 basis points. That kind of almost gets you there. But that's more how I would encourage you to model it.

Operator

And ladies and gentlemen, that concludes our question-and-answer session. I will now turn the conference back over to Mr. Ward Nye for closing remarks.

Ward Nye
Ward Nye
Chairman and CEO at Martin Marietta Materials

Abby, thank you so much. And thank you all for joining today's earnings conference call. Martin Marietta's resilient aggregates sales platform, bolstered by our high-performing specialties business and portfolio enhancements, positions us to drive sustainable earnings growth and respond with agility to evolving market dynamics. Through the disciplined execution of SOAR 2025, we've strengthened our presence in economically vibrant markets with compelling long-term demand drivers while enhancing our product mix, earnings profile, and growth trajectory. As we embark on SOAR 2030, the next phase of our five-year strategic plan, our strong financial foundation, and enduring commitment to long-term value creation reinforce our confidence in delivering superior results for our shareholders now and into the future. As always, we're available for any follow-up questions. And thank you again for your time and continued support of Martin Marietta.

Operator

Ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.

Executives
    • Jacklyn Rooker
      Jacklyn Rooker
      VP of Investor Relations
    • Ward Nye
      Ward Nye
      Chairman and CEO
    • Michael Petro
      Michael Petro
      SVP and CFO
Analysts
    • Kathryn Thompson
      Analyst at Thompson Research Group
    • Trey Grooms
      Equity Research Analyst at Stephens
    • Anthony Pettinari
      Research Analyst at Citigroup
    • Phil Ng
      Analyst at Jefferies
    • Esther Osinaiya
      Equity Research Associate at Morgan Stanley
    • Adam Thalhimer
      Analyst at Thompson Davis
    • Garik Shmois
      Analyst at Loop Capital
    • Keith Hughes
      Analyst at Truist
    • Andrew Foster
      Analyst at SunTrust
    • David MacGregor
      Senior Analyst at Longbow Research
    • Mike Dudas
      Equity Research Analyst at Vertical Research Partners
    • Ivan Yi
      Analyst at Wolfe Research
    • Judah Aronovitz
      Analyst at UBS
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