Madison Investments, an investment advisor, released its “Madison Small Cap Fund” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. The third quarter was difficult for the Small Cap Fund.  The small-cap index’s performance was broad-based. The Madison Small Cap Fund (class Y) was down 1.3% in the quarter, significantly underperforming the benchmarks. The underperformance was driven by stock selection and exacerbated by a very speculative market. In addition, please check the f ...

Core Insights - Eagle Materials Inc. reported earnings per share (EPS) of $8.72, significantly exceeding the estimated EPS of $4.35 [1][5] - The company's revenue for the quarter ending in September 2025 was approximately $638.9 million, surpassing the estimated $635.5 million, and representing a 2.5% year-over-year increase [2][5] Financial Metrics - The price-to-earnings (P/E) ratio of Eagle Materials Inc. is approximately 11.93, indicating the market's valuation of its earnings [3][5] - The price-to-sales ratio stands at about 3.08, reflecting the market's valuation of its revenue [3] - The enterprise value to sales ratio is around 3.39, suggesting how the market values the company's total value in relation to its sales [3] Debt and Liquidity - The company's debt-to-equity ratio is approximately 0.50, indicating a moderate level of debt relative to its equity [4] - The current ratio is about 2.72, demonstrating the company's ability to cover its short-term liabilities with its short-term assets [4]

Revenue and Earnings - Revenue for the three months ended September 30, 2025, increased by $15.3 million, or 2%, to $638.9 million, with higher sales volumes contributing $5.0 million [100]. - Net Earnings for the three months ended September 30, 2025, decreased by 4% to $137.4 million, with diluted earnings per share at $4.23 [110]. - Revenue for the six months ended September 30, 2025, increased by $41.3 million, or 3%, to $1,273.6 million, with higher sales volumes contributing $24.0 million [113]. - Net Earnings decreased by 6% to $260.7 million for the six months ended September 30, 2025 [122]. - Earnings Before Income Taxes decreased to $334.3 million during the six months ended September 30, 2025, primarily due to lower Gross Profit and higher Corporate General and Administrative expenses [120]. Costs and Expenses - Cost of Goods Sold for the same period rose by $19.4 million, or 5%, to $439.2 million, primarily due to higher sales volume and operating costs [101]. - Cost of Goods Sold for the six months rose by $46.7 million, or 6%, to $888.3 million, driven by higher sales volume and operating costs [114]. - Corporate General and Administrative expenses increased by 19% for the three months and 26% for the six months, mainly due to higher salary and professional fees [105][117]. - Operating Earnings decreased 13% to $159.9 million due to lower gross sales prices and sales volume, along with higher operating costs [142]. Gross Profit and Margins - Gross Profit decreased by 2% to $199.7 million, with a gross margin decline to 28% attributed to lower gross sales prices [102]. - Gross Profit for the six months decreased by 1% to $385.3 million, with a gross margin decline to 26% due to higher operating costs and lower gross sales prices [115]. - Operating Earnings for Cement decreased by 2% to $200.9 million for the six months ended September 30, 2025, due to higher operating costs [130]. - Operating Earnings for Concrete and Aggregates increased by 610% to approximately $14.1 million for the six months ended September 30, 2025 [136]. - Operating Margin for Recycled Paperboard increased to 23% due to a decrease in operating costs, despite lower sales volume [146]. Revenue by Segment - Cement Revenue increased by 6% to $732.5 million for the six months ended September 30, 2025, driven by higher Sales Volume and gross sales prices [129]. - Concrete and Aggregates Revenue increased by 21% to $163.4 million for the six months ended September 30, 2025, with a significant contribution from higher Aggregates Sales Volume [135]. - Gypsum Wallboard Revenue decreased by 6% to $405.0 million for the six months ended September 30, 2025, impacted by lower gross sales prices and Sales Volume [141]. - Recycled Paperboard Revenue decreased 4% to $48.6 million for the three months ended September 30, 2025, primarily due to lower sales volume [144]. Cash Flow and Capital Expenditures - Net Cash Provided by Operating Activities decreased by $24.7 million to $341.2 million during the six months ended September 30, 2025 [154]. - Net Cash Used in Investing Activities increased to approximately $184.6 million, primarily for the modernization and expansion of the Mountain Cement facility [158]. - Total capital expenditures for the six months ended September 30, 2025, were $184.6 million, significantly higher than $99.6 million in 2024 [172]. - Capital expenditures for fiscal 2026 are expected to range from $475.0 million to $500.0 million, focusing on facility expansions and modernization projects [172]. Debt and Financial Management - Debt-to-capitalization ratio was 45.7% at September 30, 2025, compared to 46.1% at March 31, 2025 [160]. - The company had $255.0 million outstanding under the Revolving Credit Facility, leaving $485.1 million of available borrowings [162]. - The company has a $750.0 million Revolving Credit Facility with variable interest rates, impacting financial management strategies [176]. - A hypothetical 100 basis point increase in interest rates would increase annual interest expense by approximately $5.4 million on existing borrowings [176]. - Interest Expense, net decreased by approximately $0.3 million, or 1%, during the six months ended September 30, 2025, primarily due to increased capitalized interest [119]. Shareholder Returns and Stock Activity - Dividends paid were $16.6 million for the six months ended September 30, 2025, compared to $17.0 million for the same period in 2024 [167]. - The company repurchased a total of 753,438 shares year-to-date at an average price of $222.58 per share, with a maximum of 3,916,059 shares remaining under the repurchase plan [169]. - The company has repurchased approximately 52.0 million shares since becoming publicly held in April 1994 [169]. - The company withheld 23,968 shares from employees to satisfy tax withholding requirements upon vesting of Restricted Shares [171]. Risk Management - The company is exposed to commodity risk related to price changes in coal, coke, natural gas, and power, and attempts to limit exposure through contracts and alternative fuels [177]. - The company believes cash flow from operations and available borrowings should be sufficient to meet anticipated operating needs for at least the next 12 months [164].

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Financial Data and Key Metrics Changes - The company achieved record revenue of $639 million, up 2% from the prior year, driven by higher cement sales volume and contributions from recently acquired aggregates businesses [10] - Earnings per share (EPS) was $4.23, down 1% from the second quarter of fiscal 2025, reflecting lower net earnings primarily due to reduced wallboard sales volume [10] - Operating cash flow decreased 12% to $205 million, primarily due to working capital changes [12] Business Line Data and Key Metrics Changes - In the heavy materials sector, revenue increased by 11%, driven by increased cement sales volume and a 24% increase in concrete and aggregates revenue [10] - Record aggregates sales volume was up 103%, including contributions from recently acquired businesses, with organic aggregates sales volume up 35% [11] - The light materials sector saw a revenue decrease of 13% to $213 million, reflecting lower wallboard sales volume and a 2% decrease in wallboard sales prices [11] Market Data and Key Metrics Changes - Cement and aggregates volumes increased for the second consecutive quarter, with a favorable outlook for the remainder of the fiscal year due to unspent funds from the Infrastructure Investment and Jobs Act [5] - Wallboard volumes were impacted by reduced demand due to high interest rates and affordability challenges, with a noted stability in wallboard pricing [6] Company Strategy and Development Direction - The company is focused on long-term growth investments, including a $430 million modernization and expansion project at the Laramie, Wyoming cement plant, expected to be completed by the end of calendar 2026 [7][8] - The company is also modernizing the Duke, Oklahoma wallboard facility, which will lower production costs by about 20% [9] - The company continues to seek high growth, high return projects and is open to M&A opportunities that meet return criteria [9] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding cement and aggregates volume recovery, supported by infrastructure spending and private non-residential construction [20] - The company remains focused on long-term growth despite short-term challenges in the residential construction market affecting wallboard demand [6][7] - Management highlighted the importance of maintaining a balance between price and volume, emphasizing a preference for price stability [18] Other Important Information - The company repurchased approximately 396,000 shares for $89 million during the quarter, returning a total of $97 million to shareholders [12] - The capital spending for fiscal 2026 is expected to be in the range of $475 million to $500 million, with a projected decrease in spending for fiscal 2027 [34] Q&A Session Summary Question: Wallboard volume performance and demand drivers - Management noted a significant pullback in production from builders during July and August, impacting wallboard demand, but emphasized a long-term positive outlook due to underconsumption of wallboard in the U.S. [15][16] Question: Cement volume drivers and future expectations - Management indicated that cement volume growth is driven by infrastructure spending and private non-residential construction, with cautious optimism for continued positive trends [19][20] Question: Organic aggregates volume growth - The 35% growth in organic aggregates volume was attributed to both acquisitions and capital improvements in existing operations, with a focus on growing this segment over time [22][23] Question: Cement pricing and competitive pressures - Management acknowledged some price degradation in Texas but noted overall pricing stability in the majority of their markets, with announced price increases effective January 1, 2026 [27][29] Question: Capital expenditures and tax implications - Capital spending for fiscal 2026 is expected to be $475 million to $500 million, with significant tax benefits from accelerated depreciation on new projects [33][36]

Core Insights - Eagle Materials reported quarterly earnings of $4.23 per share, missing the Zacks Consensus Estimate of $4.35 per share, and showing a slight increase from $4.31 per share a year ago, resulting in an earnings surprise of -2.76% [1] - The company posted revenues of $638.91 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 0.96% and increasing from $623.62 million year-over-year [2] - Eagle Materials has underperformed the market with a 5.5% decline in share price since the beginning of the year, compared to a 17.2% gain in the S&P 500 [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $3.66 on revenues of $571.12 million, and for the current fiscal year, it is $13.99 on revenues of $2.32 billion [7] - The estimate revisions trend for Eagle Materials was unfavorable prior to the earnings release, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] Industry Context - The Building Products - Concrete and Aggregates industry, to which Eagle Materials belongs, is currently ranked in the top 22% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Another company in the same industry, Martin Marietta, is expected to report quarterly earnings of $6.65 per share, reflecting a year-over-year increase of 12.5%, with revenues projected at $2.05 billion, up 8.5% from the previous year [9][10]

October 30, 2025 Forward-Looking Statements Forward-Looking Statements. This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the context of the statements and generally arise when the Company is discussing its beliefs, estimates or expectations as to future events. These statements are no ...

Financial Performance - Record revenue of $639 million for Q2 fiscal 2026, an increase from the previous year [3] - Net earnings of $137.4 million, with diluted EPS of $4.23 [6] - Gross margins at 31.3%, reflecting strong operational performance [3] - Adjusted EBITDA reached $233.3 million, indicating strong cash flow generation [6] - Earnings before interest and income taxes for the quarter were $185,836,000, down 5% from $195,965,000 in the same quarter of 2024 [23] - Adjusted EBITDA for the quarter was $233,293,000, compared to $242,224,000 in the prior year, reflecting a decrease of 4% [32] - Trailing Twelve Months Adjusted EBITDA decreased to $798,276,000 from $816,674,000 [34] Sales Performance - Cement sales volume increased by 8% to 2.2 million tons, driven by public infrastructure spending [4] - Organic aggregates sales volume surged 35%, contributing to a 24% revenue increase in the Concrete and Aggregates segment [9] - Heavy Materials revenue rose 11% to $466.5 million, supported by higher sales volume and contributions from recent acquisitions [7] - Heavy Materials revenue increased to $426,299,000, up 12% from $379,501,000 year-over-year, driven by a 9% increase in cement sales volume [26] - Cement sales volume increased by 8% to 2,196,000 tons in Q2 2025, while concrete sales volume remained flat at 347,000 cubic yards [26] - The average net sales price for cement decreased by 1% to $155.10 per ton, while the average price for aggregates increased by 13% to $14.31 per ton [26] Segment Performance - Light Materials revenue decreased by 13% to $212.6 million, primarily due to a 14% decline in Gypsum Wallboard sales volume [10] - Light Materials revenue decreased to $212,607,000, down 13% from $244,118,000, primarily due to a 14% decline in Gypsum Wallboard sales volume [23] - Segment operating earnings for Heavy Materials rose to $127,698,000, a 11% increase from $114,938,000 in the prior year [23] Shareholder Actions - The company repurchased 395,500 shares for approximately $89 million, enhancing shareholder value [6] Capital Expenditures and Investments - The company is modernizing its Mountain Cement plant and expanding its Duke, OK Gypsum Wallboard plant, positioning for future growth [5] Balance Sheet and Debt - Total current assets decreased to $671,300,000 from $730,449,000 year-over-year, primarily due to a reduction in cash and cash equivalents [29] - Total debt as of September 30, 2025, is $1,293,750,000, an increase from $1,246,250,000 as of March 31, 2025 [34] - Cash and cash equivalents increased to $35,033,000 from $20,401,000 [34] - Net Debt as of September 30, 2025, is $1,258,717,000, up from $1,225,849,000 [34] - Net Debt to Adjusted EBITDA ratio increased to 1.6x from 1.5x [34]

Company Overview - Eagle Materials Inc. (EXP) is a Dallas-based producer of cement and gypsum wallboard, with operations also in concrete, aggregates, and recycled paperboard [2] - The company's operations are evenly split between heavy materials (cement-centric) and light materials (wallboard-centric), with strategically located plants in import-insulated U.S. markets [2] Market Demand and Supply Dynamics - Cement demand is driven by aging infrastructure and a structural housing shortage, primarily used in public infrastructure, residential, and commercial construction [2] - Wallboard benefits from long-term supply advantages through natural gypsum mines and a 60-year supply agreement with Santee Cooper, protecting EXP from declines in U.S. synthetic gypsum output [3] - Both segments exhibit "rock pit" characteristics, which means local supply constraints and high transportation costs enhance EXP's pricing power and profitability [3] Competitive Advantages - The company operates in a defensible industry with limited domestic supply growth due to regulatory constraints on new cement plants, creating a natural moat for existing producers [4] - EXP is the lowest-cost producer in the industry, which supports high and stable margins, while disciplined capital allocation has led to strong returns on equity and long-term earnings growth [5] - Historical performance indicates mid-single-digit volume growth, double-digit pricing gains, and EPS compounding above revenue growth, reflecting operational efficiency and shareholder-aligned management [5] Growth Catalysts and Long-term Outlook - Key catalysts for growth include ongoing infrastructure spending, constrained domestic supply, and continued secular growth in U.S. housing [6] - Despite appearing cyclical, EXP's local monopolistic advantages, stable cost structure, and long-term growth prospects position it as a compelling compounder capable of mid-teen returns over the next 5–10 years [6] Historical Context - Previous bullish theses on EXP highlighted its localized concrete business, vertical integration, low-cost production, and disciplined capital allocation, with the stock depreciating approximately 2.4% since the last coverage [7] - The current thesis emphasizes long-term gypsum supply and structural demand drivers, aligning with previous positive assessments of the company's regional monopolies and robust margins [7]

Group 1 - Eagle Materials Inc. (NYSE:EXP) produces and sells cement, concrete, aggregates, gypsum wallboard, and recycled paperboard for various construction sectors [1] - Jim Cramer advised against investing in Eagle Materials, suggesting alternatives like OC and Home Depot as better options [1] - In L1 Capital's second quarter 2025 investor letter, Eagle Materials was noted as one of three companies that detracted more than 0.5% from the Fund's returns for the quarter [1] Group 2 - There is acknowledgment of Eagle Materials' potential as an investment, but certain AI stocks are believed to offer greater upside potential and less downside risk [2]