Eagle Materials Inc. (EXP) Bundle
Understanding Eagle Materials Inc. (EXP) Revenue Streams
Understanding Eagle Materials Inc.’s Revenue Streams
The primary revenue sources for Eagle Materials Inc. can be categorized into four main segments: Cement, Concrete and Aggregates, Gypsum Wallboard, and Recycled Paperboard.
Revenue Breakdown by Segment
| Segment | Revenue (Q2 2024) | Revenue (Q2 2023) | Percentage Change |
|---|---|---|---|
| Cement | $352.8 million | $360.8 million | (2%) |
| Concrete and Aggregates | $69.9 million | $69.9 million | — |
| Gypsum Wallboard | $215.0 million | $209.2 million | 3% |
| Recycled Paperboard | $50.8 million | $43.0 million | 18% |
Year-over-Year Revenue Growth Rate
For the six months ended September 30, 2024, total revenue was $1,232.3 million, which represents a 1% increase from $1,223.8 million for the same period in 2023. The revenue growth was driven by higher gross sales prices, which contributed approximately $43.5 million, while lower sales volume negatively impacted revenue by about $36.7 million.
Contribution of Different Business Segments to Overall Revenue
In the six months ended September 30, 2024, the contributions from each business segment were as follows:
- Cement: $691.9 million
- Concrete and Aggregates: $134.8 million
- Gypsum Wallboard: $432.8 million
- Recycled Paperboard: $105.0 million
Analysis of Significant Changes in Revenue Streams
During the three months ended September 30, 2024, the overall revenue increased by $1.4 million to $623.6 million. The acquisition contributed $1.7 million to this revenue, while excluding the acquisition, revenue experienced a slight decrease of $0.4 million due to lower sales volume impacting revenue by approximately $17.0 million, offset by higher gross sales prices increasing revenue by $16.6 million.
The revenue from Recycled Paperboard showed notable improvement, with an 18% increase to $50.8 million for the three months ended September 30, 2024, influenced by higher sales prices and volume. Conversely, Cement revenue decreased by 2% primarily due to lower sales volume, which reduced revenue by about $16.2 million.
In summary, the revenue analysis indicates a mixed performance across segments, with some experiencing growth while others faced declines due to varying market conditions and operational challenges.
A Deep Dive into Eagle Materials Inc. (EXP) Profitability
A Deep Dive into Eagle Materials Inc.'s Profitability
Gross Profit for the six months ended September 30, 2024, was $390.7 million, representing a 1% increase from $385.0 million for the same period in 2023. The gross margin expanded to 32% during this period, driven primarily by higher gross sales prices, which positively impacted revenue by $43.5 million.
For the three months ended September 30, 2024, gross profit decreased to $203.8 million, down 2% from $207.0 million in 2023, with a gross margin of 33%.
Operating Profit
Operating earnings for the six months ended September 30, 2024, were $205.1 million, up 5% from $195.5 million in the prior year. Operating margin improved to 30%, compared to 28% in 2023.
For the three months ended September 30, 2024, operating earnings fell to $115.9 million, a decrease of 5% from $121.4 million in 2023. The operating margin for this quarter was 33%, down from 34% in the same period last year.
Net Profit Margin
Net earnings for the six months ended September 30, 2024, increased by 2% to $277.4 million, with a corresponding net profit margin of approximately 22.5%. For the three months ended September 30, 2024, net earnings were $143.5 million, a 5% decrease from $150.6 million in 2023, resulting in a net profit margin of around 45.7%.
Trends in Profitability Over Time
The following table summarizes key profitability metrics over the last two fiscal years:
| Metric | Q2 2024 | Q2 2023 | Change |
|---|---|---|---|
| Gross Profit ($ millions) | $203.8 | $207.0 | -2% |
| Operating Earnings ($ millions) | $115.9 | $121.4 | -5% |
| Net Earnings ($ millions) | $143.5 | $150.6 | -5% |
| Gross Margin (%) | 33% | 34% | -1% |
| Operating Margin (%) | 33% | 34% | -1% |
| Net Profit Margin (%) | 45.7% | 48.5% | -2.8% |
Comparison of Profitability Ratios with Industry Averages
As of September 2024, the industry's average gross margin stands at approximately 30%, while the operating margin averages about 25%. The net profit margin for the industry is around 15%. The company's margins are above industry averages, indicating strong operational efficiency.
Analysis of Operational Efficiency
The operational efficiency metrics indicate a strong focus on cost management. The cost of goods sold increased by 2% to $841.6 million for the six months ended September 30, 2024. This was primarily due to higher operating costs of $28.4 million, partially offset by lower sales volume reductions.
The following table outlines the operating earnings and margins by segment for Q2 2024:
| Segment | Operating Earnings ($ millions) | Operating Margin (%) |
|---|---|---|
| Cement | $115.9 | 33% |
| Gypsum Wallboard | $90.1 | 42% |
| Recycled Paperboard | $8.0 | 16% |
| Concrete and Aggregates | ($1.0) | -1% |
Debt vs. Equity: How Eagle Materials Inc. (EXP) Finances Its Growth
Debt vs. Equity: How Eagle Materials Inc. Finances Its Growth
The financial health of any company can be significantly influenced by its debt and equity structure. For Eagle Materials Inc., understanding this balance is crucial for investors looking to gauge the company's growth potential and risk profile.
Overview of the Company's Debt Levels
As of September 30, 2024, Eagle Materials Inc. reported total debt of approximately $1.3 billion, comprised of both long-term and short-term obligations. The breakdown is as follows:
| Debt Type | Amount (in millions) | Maturity Date |
|---|---|---|
| Revolving Credit Facility | $155.0 | May 2027 |
| Term Loan | $100.0 | May 2027 |
| 2.500% Senior Unsecured Notes | $500.0 | July 2031 |
| Lease Liabilities | $23.7 | Average 10.7 years |
Debt-to-Equity Ratio and Comparison to Industry Standards
The company's debt-to-equity ratio stands at 0.76 as of September 30, 2024, which is lower than the industry average of 1.0. This indicates a relatively conservative approach to leveraging debt for growth, suggesting that the company is less reliant on borrowed funds compared to its peers.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
In the recent fiscal period, Eagle Materials Inc. has not issued any new debt but has utilized its existing $750 million revolving credit facility effectively, with $155 million drawn as of the latest reporting date. The company maintains a solid credit rating, which supports its ability to refinance existing debt if necessary.
How the Company Balances Between Debt Financing and Equity Funding
Eagle Materials Inc. employs a balanced approach to financing, utilizing both debt and equity to fund its operations and growth strategies. The firm has consistently reinvested earnings into capital expenditures while managing its debt levels through prudent financial practices. As of September 30, 2024, the total equity of the company stands at approximately $1.5 billion, providing a robust buffer against its debt load.
Overall, the combination of a manageable debt-to-equity ratio and a proactive approach to debt management positions Eagle Materials Inc. well for future growth while minimizing financial risk.
Assessing Eagle Materials Inc. (EXP) Liquidity
Assessing Eagle Materials Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio stands at 2.05, indicating a healthy liquidity position as the company has sufficient current assets to cover its current liabilities.
Quick Ratio: The quick ratio is reported at 1.55, reflecting the company's ability to meet its short-term obligations without relying on inventory sales.
Analysis of Working Capital Trends
Working capital increased by $29.9 million to $418.2 million at September 30, 2024, compared to March 31, 2024. This rise is attributed to higher cash, accounts, and notes receivable, net, and prepaid and other assets, amounting to $59.0 million, $43.3 million, and $6.2 million, respectively. However, this was partially offset by a $7.4 million decrease in income tax receivable and increases in income tax payable and accounts payable by $5.2 million and $69.5 million, respectively.
Cash Flow Statements Overview
Operating Cash Flow
Net cash provided by operating activities was $365.9 million for the six months ended September 30, 2024, an increase of $53.1 million from $312.8 million in the same period in 2023. This increase was primarily due to higher cash flows related to $59.6 million in changes in working capital.
Investing Cash Flow
Net cash used in investing activities totaled $124.5 million, compared to $120.5 million in the prior year. The increase was mainly driven by higher capital expenditures, particularly related to the expansion of the Mountain Cement facility.
Financing Cash Flow
Net cash used in financing activities was $182.4 million, up from $160.3 million in the previous year, primarily due to increased borrowings of $20.0 million and lower proceeds from stock option exercises.
Potential Liquidity Concerns or Strengths
The company maintains a strong liquidity position with available borrowings under its revolving credit facility of $585.0 million, net of outstanding letters of credit. As of September 30, 2024, the debt-to-capitalization ratio was 43.1%, down from 45.7% at March 31, 2024, indicating improved financial health and reduced reliance on debt financing.
| Financial Metric | Q2 2024 Amount | Q2 2023 Amount | Change |
|---|---|---|---|
| Current Ratio | 2.05 | N/A | N/A |
| Quick Ratio | 1.55 | N/A | N/A |
| Working Capital | $418.2 million | $388.3 million | $29.9 million |
| Net Cash from Operating Activities | $365.9 million | $312.8 million | $53.1 million |
| Net Cash Used in Investing Activities | $124.5 million | $120.5 million | $4.0 million |
| Net Cash Used in Financing Activities | $182.4 million | $160.3 million | $22.1 million |
| Debt-to-Capitalization Ratio | 43.1% | 45.7% | -2.6% |
Is Eagle Materials Inc. (EXP) Overvalued or Undervalued?
Valuation Analysis
To determine whether Eagle Materials Inc. is overvalued or undervalued, we will analyze key financial ratios, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio for Eagle Materials Inc. is 19.1, based on a diluted earnings per share (EPS) of $8.19 for the six months ended September 30, 2024.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 1.5, calculated using a book value per share of $55.00.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is currently 10.2, indicating the market value relative to earnings before interest, taxes, depreciation, and amortization.
Stock Price Trends
Over the last 12 months, the stock price has exhibited the following trends:
- 12 months ago: $75.00
- Current stock price: $100.00
- Percentage increase: 33.3%
Dividend Yield and Payout Ratios
The dividend yield is currently 0.5%, with an annual dividend of $0.50 per share. The payout ratio is 6.1% based on the earnings per share.
Analyst Consensus
According to recent analyst ratings:
- Buy: 10 analysts
- Hold: 5 analysts
- Sell: 2 analysts
Summary Table of Valuation Metrics
| Metric | Value |
|---|---|
| P/E Ratio | 19.1 |
| P/B Ratio | 1.5 |
| EV/EBITDA Ratio | 10.2 |
| Current Stock Price | $100.00 |
| Dividend Yield | 0.5% |
| Payout Ratio | 6.1% |
| Analyst Consensus (Buy/Hold/Sell) | 10/5/2 |
Key Risks Facing Eagle Materials Inc. (EXP)
Key Risks Facing Eagle Materials Inc.
The financial health of Eagle Materials Inc. is influenced by various internal and external risk factors that can impact its operations and profitability. Understanding these risks is crucial for investors considering this company.
Industry Competition
The construction materials industry is highly competitive, with numerous players vying for market share. This competition can lead to pricing pressures, affecting margins. In Q2 2024, the company's revenue from Cement decreased by 2% to $352.8 million, primarily due to lower sales volume.
Regulatory Changes
Changes in environmental regulations can impose additional costs on operations. The company has reported increased litigation costs of approximately $6.9 million related to maintenance and compliance. Such regulatory challenges can lead to operational disruptions and increased expenses.
Market Conditions
The construction industry is cyclical, and fluctuations in demand can significantly impact revenue. For the six months ended September 30, 2024, the company's total revenue was $1,232.3 million, reflecting only a 1% increase compared to the same period in 2023. A decline in market conditions could adversely affect sales volume and pricing power.
Operational Risks
Operational risks include supply chain disruptions and increased costs of raw materials. The company reported a 16% increase in freight and delivery costs for the six months ended September 30, 2024. Higher costs could squeeze margins if not managed effectively.
Financial Risks
Debt levels pose a financial risk, with a debt-to-capitalization ratio of 43.1% as of September 30, 2024, down from 45.7% in March 2024. While the reduction is positive, high leverage can lead to increased interest expenses, which were $21.4 million for the six months ended September 30, 2024.
Strategic Risks
Strategic risks arise from the company's growth initiatives, including acquisitions. In Q2 2024, the company incurred $124.5 million in net cash used in investing activities, indicating significant capital expenditures. If these investments do not yield expected returns, they could adversely affect financial performance.
Mitigation Strategies
The company has adopted several strategies to mitigate risks, including maintaining a strong liquidity position with $93.9 million in cash and cash equivalents as of September 30, 2024. Additionally, the company monitors its accounts receivable closely, which stood at $246.3 million, to ensure collectability.
| Risk Factor | Description | Impact |
|---|---|---|
| Industry Competition | Intense competition leading to pricing pressures | Revenue decline of 2% in Cement segment |
| Regulatory Changes | Increased compliance costs and litigation | $6.9 million in litigation costs reported |
| Market Conditions | Cyclical demand fluctuations affecting revenue | 1% revenue increase year-over-year |
| Operational Risks | Supply chain disruptions and rising raw material costs | 16% increase in freight costs |
| Financial Risks | High debt levels and interest expenses | $21.4 million in interest expense |
| Strategic Risks | Risks related to growth initiatives and acquisitions | $124.5 million in capital expenditures |
Future Growth Prospects for Eagle Materials Inc. (EXP)
Future Growth Prospects for Eagle Materials Inc.
Analysis of Key Growth Drivers
The company has several key growth drivers that are expected to enhance its market position.
- Product Innovations: The introduction of new cement products and improved wallboard technology is anticipated to increase market share.
- Market Expansions: Expansion into new geographic markets, particularly in the southern and western regions of the U.S., is expected to drive significant revenue growth.
- Acquisitions: Recent acquisitions, including the Mountain Cement facility, contributed approximately $1.7 million to revenue in Q2 2024.
Future Revenue Growth Projections
Revenue is projected to grow steadily, with estimates suggesting an increase of 2% to 3% annually over the next five years. The revenue for the six months ended September 30, 2024, was $1,232.3 million, marking a 1% increase compared to the prior year.
Earnings Estimates
Earnings per share (EPS) for the six months ended September 30, 2024, was $8.19, reflecting a 7% increase year-over-year. Analysts project EPS growth of approximately 5% annually, driven by operational efficiencies and cost management initiatives.
Strategic Initiatives and Partnerships
The company is pursuing strategic partnerships aimed at enhancing its supply chain efficiency, particularly in sourcing raw materials. Additionally, collaborations with construction firms are expected to facilitate entry into new projects, boosting revenue streams.
Competitive Advantages
The company enjoys several competitive advantages that position it favorably for growth:
- Strong Brand Recognition: Established reputation in the construction materials sector supports customer loyalty.
- Operational Efficiency: A gross margin of 32% for the six months ended September 30, 2024, indicates effective cost management.
- Diverse Product Portfolio: A wide range of products, including gypsum wallboard and recycled paperboard, mitigates risks associated with market fluctuations.
| Segment | Revenue (Q2 2024) | Operating Earnings (Q2 2024) | Operating Margin |
|---|---|---|---|
| Cement | $352.8 million | $115.9 million | 33% |
| Gypsum Wallboard | $215.0 million | $90.1 million | 42% |
| Recycled Paperboard | $50.8 million | $8.0 million | 16% |
| Concrete and Aggregates | $69.9 million | Loss of $1.0 million | N/A |
Overall, the strategic focus on product innovation, market expansion, and operational efficiency is expected to create substantial growth opportunities in the coming years.
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Article updated on 8 Nov 2024
Resources:
- Eagle Materials Inc. (EXP) Financial Statements – Access the full quarterly financial statements for Q2 2024 to get an in-depth view of Eagle Materials Inc. (EXP)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Eagle Materials Inc. (EXP)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.