On Wednesday, Citi updated its stance on Eagle Materials (NYSE:EXP), increasing the price target to $311 from the previous $252, while reaffirming a Buy rating on the stock. The adjustment follows Eagle Materials' impressive fiscal first-quarter performance, which saw the company's shares surge by approximately 7%. The rise in stock value is attributed to a combination of factors including an expansion of cement earnings before interest and taxes (EBIT) margins by 290 basis points year-over-year, attributed to strong pricing, a reduction in maintenance costs by around $2 million, lower fuel costs by about $1 million, and the non-recurrence of approximately $3 million in inventory step-up costs.
The reduction in maintenance costs was partly due to approximately $7 million in maintenance being brought forward into the fourth quarter of fiscal year 2024. Although the benefits from maintenance and inventory step-up are considered one-time events, the possibility of continued lower fuel costs into the second half of the calendar year was noted. Eagle Materials anticipates cement prices to remain stable quarter-over-quarter in the fiscal second quarter, as a slow start to the construction season could likely eliminate the potential for mid-year price increases.
Citi's analysis indicates that while capital expenditures are expected to increase through calendar year 2026 with the expansion of the Laramie facility—a project that could add over $50 million in EBITDA—Eagle Materials still has financial flexibility. The company's leverage ratio stands at 1.3 times, leaving room for potential share buybacks or bolt-on acquisitions.
Reflecting the strong first-quarter results and a positive margin outlook, Citi has raised its fiscal year 2025 EBITDA estimates by 2% and its 2026-2027 EBITDA estimates by 1%. The new price target of $311 is based on a 12.5x next twelve months (NTM) EBITDA multiple, which takes into account both the improved margin profile and peer valuations.
Lastly, Eagle Materials Inc . reported record revenue of $609 million in the first quarter of fiscal year 2025, representing a modest 1% increase from the earlier period. The company also experienced a notable 16% rise in earnings per share. These positive results were attributed to a focus on operational efficiency, safety, sustainability, and strategic organic investments. Eagle Materials expressed a positive outlook for their cement and wallboard businesses, expecting benefits from public infrastructure spending, non-residential construction, and market dynamics.
InvestingPro Insights
In light of the recent analysis by Citi, Eagle Materials (NYSE:EXP) has shown a strong financial and market performance. Reflecting this, InvestingPro data indicates a robust market capitalization of $9.25 billion, with a Price/Earnings (P/E) Ratio of 19.46, suggesting investor confidence in the company's earnings potential. The Price/Book ratio, standing at 6.85 for the last twelve months as of Q1 2025, points towards a higher valuation of the company's net assets.
InvestingPro Tips reveal that management's aggressive share buybacks could be a signal of their confidence in the company's value. Additionally, three analysts have revised their earnings upwards for the upcoming period, indicating potential for future financial performance that could interest investors. It's worth noting that Eagle Materials has also maintained dividend payments for 21 consecutive years, showcasing a commitment to returning value to shareholders. For those seeking deeper insights, InvestingPro offers additional tips on the company's financial health and future outlook.
With Eagle Materials trading near its 52-week high and the next earnings date set for October 24, 2024, investors may find these metrics and tips from InvestingPro to be valuable in assessing the company's current position and future prospects. For a more comprehensive analysis, there are 13 additional InvestingPro Tips available for Eagle Materials, providing a more nuanced understanding of the company's financial landscape.
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