Sterne Agee Has Neutral Rating On Martin Marietta Materials (MLM)

Sterne Agee has a Neutral rating and a $90 price target on shares of Martin Marietta Materials, Inc. MLM. In a note to clients, Sterne Agee writes, "MLM's 4Q10 results proved that its cost-cutting actions over the last several years are paying off, as the company reported a strong incremental margin of 62% (it has been targeting 60%). While the worst appears to be behind us in terms of end-market demand and pricing, the pace and timing of an eventual recovery remains uncertain in our view given the lack of a multi-year Highway Bill, the questionable sustainability of a residential recovery, and finding a bottom in non-residential construction. Additionally, shares continue to trade at the higher end of historic valuation ranges based on forward estimates. We have adjusted our 2011/2012 EPS to $2.50/$3.40 from $2.55/$3.34 to reflect lower volume in 2011 (up 2% vs. 5% previously), but mitigated by lower interest expense. We maintain our Neutral rating and our $88 price target, reflective of shares trading 10.5X our FY12E EBITDA, which is slightly below the “normalized” peak-trough average level." Shares of MLM gained $2.03 yesterday to close at $90.65, a gain of 2.3%.