Martin Marietta Materials, the concrete and asphalt supplier, expects demand will continue to grow after its first year of more than $1 billion in profit, thanks in part to President Trump’s plan for as much as $1.5 trillion in repairs to America’s infrastructure.
“We believe public heavy construction will gain traction in 2018,” CEO Ward Nye said during an earnings call Tuesday, “and accelerate over the next several years.”
Spending on road work – which the industry had expected to pick up in 2017 after former President Barack Obama’s approval of a $305 billion infrastructure plan in late 2015 — actually slowed as near-record rainfall combined with a decline in awards of public projects, Nye said. The need to address deteriorating thoroughfares didn’t go away, however, which is a positive for materials suppliers.
“America’s highways, bridges, roads, and streets only got a year older in 2017 and are still largely in desperate need of repairs and/or expansion,” Nye said. “These projects will get done, some in 2018, or more likely, over the next several years.”
The Trump administration’s roadmap for driving $1.5 trillion in state, local, and private-sector investments by spending $200 billion in federal funds on infrastructure should add momentum to that, he said. Some Congressional Republicans are considering paying for the proposal by hiking the gasoline tax, which hasn’t been raised in a quarter of a century; the U.S. Chamber of Commerce recommended an increase of 25 cents a gallon.
With the proposal, the president, a real estate mogul from New York City – whose roads are rife with potholes – is hoping to deliver on a campaign promise to improve the nation’s highways as well as water, sewer, and energy systems. Along with funding the government’s share, a proposal sent to Congress on Monday asks for a bill that would shorten the regulatory approval process to two years or less.
“Our nation’s infrastructure is in an unacceptable state of disrepair, which damages our country’s competitiveness,” Trump wrote. “It is time to give Americans the working, modern infrastructure they deserve.”
What Congress chooses to do with the president’s proposal will determine how effective it is, Martin Marietta said. The plan itself merely starts the conversation.
“I think we’re going to see this Congress come forward with something that’s going to be a near-term fix,” Nye said. “They’re also going to address longer-term, what the pay-fors look like.”
Regulatory changes are another pivotal piece of Trump’s proposal. Nye said he’s been told by state transportation chiefs that projects frequently take as long as 10 years to obtain the normal regulatory and environmental permits.
Reducing that to two years, as Trump proposes, is “almost revolutionary,” he said.
Martin Marietta’s sales next year may rise as much as 9.8 percent to $4.36 billion, while adjusted earnings climb to $1.19 billion, not including any changes in demand related to federal infrastructure proposals, the company said.
Earnings of $1.91 in the last three months of 2017 topped the $1.47 average estimate from analysts surveyed by Bloomberg, and revenue rose 2.3 percent to $970 million.
The company received a benefit of $258.1 million from the GOP-led tax overhaul, which cut the top corporate rate to 21 percent from 35 percent.
Martin Marietta rose 3.2 percent to $218.41 at the close of regular trading in New York on Tuesday.