Core Viewpoint - The construction materials sector is experiencing growth due to increased infrastructure investment and industrial demand, with several companies poised to benefit from this trend [1] Industry Summary - The construction materials sector is currently benefiting from a surge in infrastructure investment, which is driving demand for construction materials [1] - Industrial demand is also contributing to the positive outlook for the sector, indicating a robust market environment [1] Company Summary - Several companies within the construction materials sector are strategically positioned to capitalize on the ongoing trends in infrastructure investment and industrial demand [1]

Company Overview - Eagle Materials is a leading U.S. supplier of essential construction materials, with a diversified portfolio that includes cement, aggregates, wallboard, and recycled paperboard [4] - The company serves a broad base of customers in residential, commercial, and public infrastructure markets, leveraging vertical integration and regional scale [5] Financial Performance - As of November 14, 2025, Eagle Materials has a market capitalization of $6.63 billion, revenue of $2.30 billion, and net income of $446.80 million [3] - The stock price on November 14, 2025, was $202.06, reflecting a 33.6% decline over the past year, underperforming the S&P 500 by 46.7 percentage points [2][6] Recent Developments - L1 Capital International sold its entire $19.1 million stake in Eagle Materials, which constituted 4.7% of its 13F assets at the end of the second quarter [1][2] - The company missed earnings estimates for the second quarter of FY 2026, with wallboard volumes declining 5% in the first half due to softening demand from the residential construction sector [9] Market Trends - The U.S. housing market has softened since 2024, leading to a revenue growth decline from mid-teens in FY 2023 to zero growth in FY 2025 [7] - Elevated mortgage interest rates continue to raise concerns about housing affordability, impacting residential construction activity [9] Growth Opportunities - Despite challenges in the residential segment, Eagle's non-residential segments have shown solid growth, supported by government infrastructure projects and increased private spending [10] - The stock is currently trading at 16.3 times its trailing 12-month earnings and a price-to-sales ratio of 3.2, indicating it remains within its five-year ranges and may present a hidden gem for long-term investors [10][11]

Core Thesis - Eagle Materials Inc. is positioned to weather downturns in the housing market due to its diversified operations and strong financial discipline, despite current challenges in the gypsum wallboard segment [3][4][5] Company Overview - Eagle Materials Inc. manufactures and sells heavy construction products and light building materials in the United States, with a focus on cement and aggregates [2] - As of November 28th, the company's share price was $223.72, with trailing and forward P/E ratios of 16.49 and 14.08 respectively [1] Market Conditions - The company is facing a challenging housing backdrop, with weak homebuilding activity impacting its gypsum wallboard segment, while cement and aggregates operations are experiencing steady growth [2] - Cement volumes increased by 8%, and a recent acquisition in aggregates contributed to quarter-over-quarter gains, although these were not sufficient to offset declines in wallboard volumes and pricing [2] Financial Resilience - Despite cyclical pressures, Eagle Materials continues to generate solid cash flow, allowing for buybacks, dividends, and strategic reinvestment [3] - The company benefits from ownership of its own gypsum and limestone reserves, providing a structural cost advantage [3] Strategic Opportunities - The current downturn allows management to deploy capital more efficiently as competitors weaken, positioning the company for stronger long-term performance [4] - Maintenance and facility upgrades are expected to enhance Eagle's competitive edge when the housing market rebounds [4] Historical Context - A previous bullish thesis highlighted the company's localized market dominance and vertical integration, although the stock price has depreciated approximately 6.75% since then due to ongoing housing weakness [5] - The investment thesis remains valid as Eagle is structurally advantaged, with emphasis on cyclical pressures and capital deployment opportunities [5]

Core Insights - The article promotes a premium service called "Value in Corporate Events" that focuses on major corporate events such as earnings reports, mergers and acquisitions, and IPOs, providing actionable investment ideas [1] Group 1 - The service covers 10 major events each month, aiming to identify the best investment opportunities [1] - The leader of the investing group has a Master of Science specializing in financial markets and a decade of experience in tracking companies through catalytic events [1] - The service offers coverage of situations and names upon request, enhancing its tailored investment approach [1]

Core Insights - Madison Small Cap Fund experienced a challenging third quarter in 2025, with a decline of 1.3% in its performance, significantly underperforming benchmarks due to stock selection and a speculative market environment [1] Company Analysis: Eagle Materials Inc. (NYSE:EXP) - Eagle Materials Inc. is identified as a leading U.S. manufacturer of heavy construction materials and light building materials, with a one-month return of -13.13% and a 52-week loss of 35.57% [2][3] - The stock closed at $202.52 on November 20, 2025, with a market capitalization of $6.572 billion [2] - The company is viewed favorably due to its strong financial traits, including high margins, return on invested capital (ROIC), and return on equity (ROE) [3] - Despite a prolonged downturn in the residential construction cycle, Eagle Materials has gained market share due to its geographical footprint and cost-competitive wallboard assets [3] - The current intrinsic value estimate for Eagle Materials is calculated at $269 per share, based on conservative assumptions regarding margin expansion and share buybacks [3]

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]