• Revenue: Record $644 million, a slight increase from the prior year.
• Earnings Per Share (EPS): $4.26, consistent with the prior year.
• Operating Cash Flow: Increased 35% to $233 million.
• Heavy Materials Revenue: Declined 2% due to lower cement sales volume.
• Light Materials Revenue: Increased 5%, driven by higher wallboard and recycled paperboard sales volume.
• Operating Earnings (Light Materials): Up 5% to $98 million.
• Capital Spending: Increased to $66 million, including $27 million for Wyoming cement plant project.
• Share Repurchase: 253,000 shares repurchased for $61 million.
• Net Debt to EBITDA Leverage Ratio: 1.2 times.
• Committed Liquidity: Approximately $679 million.

• Warning! GuruFocus has detected 7 Warning Sign with OPRA.

Release Date: October 29, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Eagle Materials Inc (NYSE:EXP) achieved record revenue of $644 million in the second quarter, driven by higher cement and wallboard sales prices.
• The company reported a 35% increase in operating cash flow, reflecting strong working capital management.
• Eagle Materials Inc (NYSE:EXP) has announced price increases for cement and wallboard, indicating confidence in future demand and pricing power.
• The company is making strategic investments, such as the modernization of the Wyoming cement plant and the commissioning of the Texas Lehigh Slag Grinding facility, to enhance operational efficiency and sustainability.
• Eagle Materials Inc (NYSE:EXP) maintains a healthy balance sheet with a net debt to EBITDA leverage ratio of 1.2 times, providing financial flexibility for future investments and shareholder returns.

Negative Points

• The heavy materials sector experienced a 2% revenue decline due to lower cement sales volumes, impacted by weather and project delays.
• Operating earnings in the heavy materials sector decreased by 9%, primarily due to lower cement sales volumes and higher maintenance costs.
• The company faced non-routine expenses, including $1.6 million related to acquisition accounting and a $700,000 litigation loss.
• Weather-related disruptions and labor constraints have slowed the expected impact of the federal infrastructure bill (IIJA) on demand.
• Eagle Materials Inc (NYSE:EXP) anticipates increased maintenance costs in the upcoming quarter due to planned outages at the Texas Lehigh and Tulsa cement facilities.

Q & A Highlights

Q: Was there any negative impact from the recent hurricane on either the wallboard or heavy business, and how have volumes been trending recently? A: Fortunately, the hurricanes did not impact our operations in terms of equipment, but heavy rainfall did affect volumes in some eastern markets. October has been drier, and we are pleased with the volumes in the heavy business this month. - D. Craig Kesler, CFO

Q: Are you seeing any real pricing pressure in the wallboard market, and what is the outlook for pricing? A: We implemented a price increase in March, which is driving year-over-year improvement. Sequentially, pricing is down less than 1% due to product and regional mix changes. We expect more accommodative monetary policy to spur single-family construction activity, which should support future pricing. - D. Craig Kesler, CFO

Q: Can you provide an update on the cement demand outlook and the impact of the IIJA funding? A: We see a positive demand picture across all markets, despite some weather-related delays. The IIJA funding should boost demand, and we expect growth in the coming years as projects get underway. The Portland Cement Association also forecasts growth in the industry. - D. Craig Kesler, CFO

Q: What is the impact of the maintenance projects at the Texas Lehigh and Tulsa facilities on the upcoming quarter? A: The maintenance projects at Texas Lehigh and Tulsa will have a $6 to $8 million impact in the third quarter. These are significant investments in our facilities, expected to improve reliability and are part of our long-term maintenance cycle. - D. Craig Kesler, CFO

Q: Can you discuss the cost structure for the cement and wallboard businesses, particularly regarding energy costs? A: In the wallboard business, we control gypsum sources, and paper is sourced internally. We are hedged for about 50% of our natural gas needs. In cement, maintenance and energy are major costs, with stable fuel prices due to long-term contracts, while electricity costs can fluctuate. - D. Craig Kesler, CFO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.