Q4 2025 Earnings Call Transcript

Ladies and gentlemen, welcome to Martin Marietta's Fourth Quarter and Full Year 2025 Earnings Conference Call. All participants are in a listen-only mode. A question and answer session will follow the company's prepared remarks. As a reminder, today's call is being recorded and will be available for replay on the company's website.

I will now turn the call over to your host, Ms. Jacklyn Rooker, Martin Marietta's Vice President of Investor Relations. Jacklyn, you may begin.

Good morning. It's my pleasure to welcome you to Martin Marietta's Fourth Quarter and Full Year 2025 Earnings Call. With me today are Ward Nye, Chair, President and Chief Executive Officer, and Michael Petro, Senior Vice President and Chief Financial Officer. As a reminder, today's discussion may include forward-looking statements as defined by United States securities laws.

These statements relate to future events, operating results, or financial performance and are subject to risks and uncertainties that could cause actual results to differ materially. Martin Marietta undertakes no obligation to publicly update or revise any forward-looking statements except as legally required, whether due to new information, future developments, or otherwise. For additional details, please refer to the legal disclaimers contained in today's earnings release and other public filings which are available on both our own and the Securities and Exchange Commission's websites. Supplemental information is available both during this webcast and in the Investors section of our website.

It includes a summary of our financial results and trends, with full year and fourth quarter bridges from continuing operations to consolidated results on slides five and six, respectively. As a reminder, the company's Midlothian cement plant, related cement terminals, and Texas ready-mixed concrete operations are classified as assets held for sale as of December 31, 2025. Their associated financial results are reported as discontinued operations for all periods presented. Our full year 2026 guidance summary on slide seven reflects continuing operations unless otherwise noted. Definitions and reconciliations of non-GAAP measures to the most directly comparable GAAP measure are provided in the Appendix to the supplemental information in our SEC filings and on our website.

Ward and I will begin today's earnings call with a discussion of our fourth quarter operating performance, 2026 outlook, and supporting market trends. Michael Petro will then review our full year financial results, capital allocation, and 2026 guidance details, after which Ward will provide closing remarks. Please note that all comparisons are to the prior year's corresponding period. A question and answer session will follow.

Please limit your Q&A participation to one question. I will now turn the call over to Ward.

Thank you, Jacklyn. Good morning, and thank you for attending today's teleconference. 2025 was an outstanding year for Martin Marietta, marked by record financial, operational, and safety performance. Our aggregates business delivered record profitability and meaningful margin expansion, while our highly complementary specialties business achieved record revenues and gross profit, highlighting the strength and breadth of our portfolio. We delivered these results even as the private construction environment remained challenging, with single-family housing and nonresidential square footage starts still well below their most recent post-COVID peaks.

These outcomes underscore the durability of our aggregates-led business model, reinforced by intentional portfolio shaping and our team's disciplined execution. In short, this is our strategic operating analysis and review, or SOAR plan, in action. Thoughtful strategy, rigorous execution led by a high-performing team, and a product portfolio engineered to outperform through macroeconomic cycles. With that context, I'll briefly summarize the principal achievements of SOAR 2025. Over the five-year period ended 12/31/2025, we delivered a 208 basis point price-cost spread, exceeding our 200 basis point SOAR 2025 target, and achieved a compound annual growth rate of more than 13% in aggregates gross profit per ton.

From a capital allocation standpoint, we announced or executed approximately $16 billion of portfolio-enhancing transactions. We invested $3.2 billion in sustaining and growth CapEx and returned $2.1 billion to shareholders through dividends and share repurchases. Of vital importance to our investors, over the same time period, we delivered total shareholder returns of 126%, approximately 30 percentage points above the S&P 500 Index, over the 12/31/2020 through 12/31/2025 period. We also paid special attention to maintaining our strong balance sheet.

More specifically, we concluded the SOAR 2025 period with our leverage ratio within our target range of 2 to 2.5 times and strong free cash flow. Accordingly, we began SOAR 2030 in an enviable position, with the ability to responsibly invest in our business and the flexibility and desire to make timely and prudent acquisitions. Indeed, by thoughtfully redeploying capital from cement and downstream asset divestitures into pure aggregates positions, we expanded our footprint coast to coast, increased the aggregates contribution percentage to consolidated gross profit, and enhanced our margin profile.

All nicely positioning Martin Marietta for durable and sustainable growth. Before discussing our 2025 performance and 2026 outlook, I'll highlight some fourth-quarter achievements, beginning with our core aggregates business, which delivered record results across nearly every key metric. Year over year, aggregates revenues increased 8% to $1.2 billion. Gross profit rose 11% to $420 million.

Gross profit per ton improved 9% to $8.59, and gross margin expanded 93 basis points to 34%. Our specialties business also delivered record fourth-quarter results, driven by solid organic momentum and contributions from Premier Magnesia. Our full-year results were a testament to the resilience of our portfolio and the opportunities ahead. Aggregates delivered another year of outstanding performance, delivering records across nearly every financial measure, including gross profit per ton of $8.45, representing a year-over-year increase of 12%.

Notably, our specialties business also posted exceptional results, reinforcing the value of this highly complementary segment, achieving record full-year revenues and gross profit. I'm especially pleased to share that our strong financial performance was accompanied by record safety performance in our heritage business, as measured by total reportable incidents, reflecting the depth of our world-class safety culture and operational discipline. Looking ahead, our 2026 shipment guidance of 2% growth at the midpoint reflects a balanced macro environment in which we expect sustained infrastructure investment and accelerating momentum in data centers and energy to offset continued softness in private, nonresidential, and residential construction.

In line with these assumptions, we're guiding to 2026 consolidated adjusted EBITDA of approximately $2.49 billion, inclusive of contributions from discontinued operations. Upon closing of the previously announced asset exchange with Quickrete, we'll provide updated adjusted EBITDA guidance for 2026. With that outlook, we'll now turn to the end markets shaping these expectations. Infrastructure demand remains solid, driven by the bipartisan Infrastructure Investment and Jobs Act, or IIJA, and robust DOT budgets in Martin Marietta states, underpinning a multiyear pipeline of projects. As of 11/30/2025, the American Road and Transportation Builders Association, or ARTBA, reports that 71% of IIJA highway and bridge funds have been obligated.

However, only 48% has been dispersed. The gap between obligations and disbursements reflects significant remaining reimbursements and an extended construction runway beyond this year, with IIJA reimbursements expected to peak in 2026. As enacted, the IIJA is scheduled to expire in September 2026. However, both congressional chambers have already begun shaping the next surface transportation bill. The House Committee on Transportation and Infrastructure's fiscal year 2026 views and estimates affirm bipartisan reauthorization intent ahead of the deadline, while federal leadership's focus on accelerated project delivery and funding stability reinforces the nation's commitment to sustained infrastructure investment.

Equally important, state and local governments continue to strengthen their transportation funding frameworks by adopting new revenue measures designed to address long-term infrastructure needs, undertakings that continue to garner broad bipartisan support. A notable example in our company's home state of North Carolina is in Mecklenburg County, where voters this past November approved a 1% local sales tax referendum. That referendum alone is expected to generate approximately $19.4 billion over the coming decades to fund transformative improvements to roadway infrastructure and public transit across the Charlotte Metropolitan Area.

Given broad bipartisan support within Congress, as well as the administration favoring our nation's infrastructure, we remain confident in the timely passage of a new long-term surface transportation bill. Heavy nonresidential demand continues to be driven by accelerating growth in data centers and the corresponding need for power generation. Spending on data center construction remains exceptionally healthy and continues trending upward, with Goldman Sachs Research estimating hyperscalers potentially deploying over $500 billion in capital in 2026, significantly increasing power demand and requiring new generation supported by an all-of-the-above strategy.

Whether the solution is natural gas, onshore wind, grid-scale storage, or nuclear, nearly all pathways require the essential aggregates we provide, positioning Martin Marietta at the center of this long-term power generation growth opportunity. In addition, we see meaningful acceleration in Gulf liquefied natural gas, or LNG, development driven by strong export fundamentals and advancing project pipelines. As momentum builds in 2026, Martin Marietta's unmatched rail distribution network positions us to supply these large-scale projects with efficiency and reliability. Turning to residential construction, affordability remains the primary near-term constraint.

There's no question regarding the need for more housing, as demand continues to outpace supply, particularly in key Martin Marietta states. Freddie Mac estimates the US requires approximately 4 million additional homes just to restore balance, underscoring a multiyear need for increased new single-family construction. Given our purpose-built business footprint in many of the nation's most dynamic and fastest-growing regions, we're well-positioned to capture a disproportionate share of the housing recovery and light nonresidential construction that will follow. Moreover, the president's recent nomination of Kevin Walsh to succeed Jay Powell as chair of the Federal Reserve is likely to be a positive development for lowering interest rates.

I'll now turn the call over to Michael Petro to discuss our full-year financial results, capital allocation, and our 2026 guidance. Michael?

Thank you, Ward, and good morning, everyone. Starting first with the full-year 2025 results. The continuing operations Building Materials business posted revenues of $5.7 billion, a 7% increase, and generated gross profit of $1.8 billion, an increase of 13% year over year. Gross margin expanded 173 basis points to 31%, driven by strong aggregates performance that more than offset softness in our downstream businesses.

As Ward noted, our core aggregates business delivered record performance in 2025. Revenues increased 11% to $5 billion, driven by 6.9% pricing growth and volume growth of 3.8%. Gross profit increased 16% to $1.7 billion, and gross margin expanded 143 basis points to 34%, as strong pricing and shipment growth more than offset higher freight, depreciation, and general inflationary impacts, resulting in a price-cost spread of 239 basis points. Other building materials revenues decreased 8% to $992 million, and gross profit decreased 18% to $98 million, primarily driven by the Minnesota asphalt business and the impact of the April 2025 California paving divestiture.

Our specialties business delivered all-time records for revenues and gross profit of $441 million and $137 million, respectively. These outstanding results reflect strong organic performance driven by pricing growth, increased shipments across all product lines, effective cost management, and five months of contributions from Premier Magnesia following its July 25 closing. Full-year cash flow from operations increased 22% to a record of $1.8 billion, which we appropriately allocated across our longstanding priorities of targeted M&A, organic investments, and returning cash to shareholders. Consistent with that framework, in 2025, we deployed $812 million on business and land acquisitions, reinvested $680 million into our plants and equipment, and returned $647 million to shareholders, representing a total cash yield of approximately 1.7%.

As a result, we ended the year with a consolidated net debt to adjusted EBITDA ratio of 2.3 times and total liquidity of $1.2 billion, providing meaningful capacity to execute our M&A-first growth strategy. Turning now to 2026 guidance. For Aggregates, we expect low double-digit gross profit growth at the midpoint, supported by low single-digit shipment growth, mid-single-digit pricing improvement, and cost per ton generally in line with inflation. Importantly, we are comprehensively reviewing our quarry and terminal networks to better align production with prevailing demand that remains approximately 14% below 2022 levels.

While we expect these efforts to provide meaningful rationalization opportunities and operational efficiencies, our guidance reflects only the benefits from the pilot regions that were realized in 2025's fourth quarter and that will flow through the balance of 2026. Turning now to other product lines. We expect high teens gross profit growth in specialties, inclusive of acquisition contributions, while gross profit from other building materials is expected to remain relatively flat. Taken together, these assumptions support our midpoint expectations of high single-digit growth in both revenues and adjusted EBITDA from continuing operations.

As Ward noted, upon closing the asset exchange with Quickrete, we will provide updated 2026 guidance reflecting the difference between the $250 million of adjusted EBITDA from discontinued operations and the expected adjusted EBITDA contribution from the acquired assets. As we've indicated previously, planned capital spending of $575 million represents a 29% year-over-year reduction. This investment level is aligned with the business' ongoing needs and significantly increases free cash flow available for M&A and share repurchases. With that, I will turn the call back over to Ward.

Thank you, Michael. 2025 capped another remarkable five-year chapter for Martin Marietta, delivering exceptional safety, operational, and financial results while achieving all the SOAR 2025 goals we outlined during our February 2021 Investor Day. We took decisive steps to streamline the portfolio, enhancing strategic focus on our core aggregates platform, strengthened by differentiated specialties business. Building on this success, we launched SOAR 2030, our Capital Markets Day, charting a clear path for continued growth and shareholder value creation. If the operator now provides the required instructions, we'll turn our attention to addressing your questions.

Thank you. And we'll now begin the question and answer session. If you have dialed in and would like to ask a question, please press 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press 1 a second time.

If you're called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. To be able to take as many questions as possible, we ask that you please limit yourself to one question. Again, it is 1 if you would like to join the queue. And our first question comes from the line of Kathryn Thompson with Thompson Research Group.

Your line is open.

Good morning, and thank you for taking my question today. For you guys, I had just a broad policy question that's a two-part. The first is obvious on IIJA. It expires in September.

And having recently spoken with TxDOT, we understand that they've modeled in multiple different scenarios addressing the new highway bill from funding increases to funding declines. The first part of my question is, can you share your latest intelligence on where Congress is on the new highway bill and what funding levels are most likely? The second part is how critical is federal funding now with states and local municipalities? You have markets like Charlotte County, Mecklenburg County, just passed significant incremental funding over the past several years.

Is the highway bill as important as it used to be for state DOTs? And for Martin Marietta? Thanks very much.

Kathryn, good morning. It's nice to hear your voice, and thanks for the question. So I would say several things. One, the highway bill continues to be important.

It doesn't have the same overarching importance that it did, let's call it, fifteen or twenty years ago because, as you said, municipalities and states have clearly picked up their game, and I think they intend to continue doing that. That said, recognizing it is important, I would say several things. One, if we're looking at the bill structure today, I would say both the House and the Senate are intent on pursuing a five-year reauthorization of highway public transportation programs. Number two, I think they're both pretty committed to not having some of the broader components that were in the last bill structure.

And what I mean by that, Kathryn, is in a $1.2 trillion bill, $350 billion went to highways, bridges, roads, and streets. So I think we can anticipate a larger portion of that is going to highways, bridges, roads, and streets this time. From my understanding, and I've spoken to members of the Senate committee and the House committee, they're targeting spring for a release of the text, and what that means is I think that schedule gives us ample time to complete the action by September 30. So at this point, at least from what I'm hearing, all the discussion is relative to an on-time multiyear reauthorization.

You know, I think one thing that's worth noting is even if they didn't get it done exactly on September 30, and we can look at the past practices. And what that makes it clear is that we're either going to get a multiyear highway bill or an interim measure. And even the interim measure would have to continue funding at the record that I think is modestly over $72 billion for right now. So I think that would be hugely attractive.

But, again, everything that I'm seeing is it's going to be on time. And at least what I've been told is, and I'm quoting, I won't be disappointed in what I see come out of that. So I'm going to take them at their word on that. Now to your point, though, on what's going on at the local level, I did call out in my comments what had happened, as you noted, in Mecklenburg County, which Charlotte is the county seat.

That's North Carolina's largest city. It's the largest city between Washington DC and Atlanta. And, you know, what that meant, Kathryn, is they put $19 billion out there over a couple of decades so they can continue to grow their infrastructure needs in and around Charlotte. Because Charlotte has the high-class problem that Raleigh-Durham has and that Atlanta has and that Dallas-Fort Worth has and Denver has and that Tampa has and that so many Martin Marietta markets do, and that is population inflows are so significant.

And states have to pick up their game, which they've done, municipalities have to pick up their game, which they've done. And notably, when those ballot measures are put out there, they pass in the high 80% of the time. So, again, I think that underscores why at the national level, we see this getting done on time because it does have broad bipartisan support. So thank you for the question, Kathryn.

I hope that helped.

It does. Thanks very much. I'll hop back in the queue.

And our next question comes from the line of Adam Thalhimer with Thompson Davis Company. Your line is open.

Hey. Hey. Good morning, guys.

Hey, Adam.

Ward, can you provide some clarification on the guidance? What's in and what's out? I'm specifically curious about Minnesota, the acquisition there. And then finally, should we assume a slow start to the year given challenging weather?

Adam, thanks for the question. I'll do my best to clarify things. I hope it's out there, but I know it's a lot to read. So I would say several things.

One, if we start with consolidated adjusted EBITDA in the midpoint of really $2.49 billion. That is truly an all-in number relative to, in many respects, how we finished the year last year. So does it have our heritage aggregates and organic aggregates business in it? You bet.

Does it have disc ops? In other words, the cement in North Texas and the concrete that goes with it. You bet. So that's how I would capture what's in the consolidated adjusted EBITDA.

Now if we go to adjusted EBITDA from continuing operations, this is when it's got a little bit of shimmy to it, and here's what I mean by that. It's got the organic business in that, and really, that's what it has solely and uniquely. So take out cement, take out the ready mix that goes with cement, and, frankly, take out the Minnesota. So I think that comes back and answers your question.

Part of what we intend to do when we close Quickrete is come back and reset the table. And the resetting of the table will have the Quickrete assets in it, you will also have the Minnesota business in it, and then we will give you a nice clean picture of what we believe the balance of 2026 will look like. But, again, I hope that answers your question directly, Adam.

Oh, great. And then just maybe on the slow start to the year potential.

Well, you know what? Potentially is a good word because, actually, I'll talk more about Q1 when we report. I'll tell you this, I was not disappointed in what I saw in January. And it would have been easy looking from the outside in and seeing a lot of cold weather and seeing places like Texas having a deep freeze and the Southeast having a deep freeze.

Thinking, boy, that's got to be a slow start. Actually, I saw really resilient performance in January, which I was heartened by. And part of what that led me to think, Adam, is I'm reflecting really on last year. And the way that we gave you a guide to last year.

As you recall, the words I think I used almost twelve months ago today is think we're giving you a nice measured guide, very thoughtful guide for the year. And you recall how the year played out last year. And I would like to see it play out that way again this year. And so far, I haven't seen anything in the early days that dissuade me of that view.

Thanks, Ward.

Thank you, Adam.

And our next question comes from the line of Trey Grooms with Stephens. Hey. Good morning, Ward and Michael.

Hey, Trey.

Hey, Trey.

Just kind of sticking with the guidance here. You know, given what we've seen with contract awards in your markets and maybe what you're seeing from the field and hearing from your contractor customers maybe on, you know, both the public and private side. Could you give us a little more color on how your end market assumptions and the mix there kind of build into your outlook for 1% to 3% volume growth this year? And then within that 1% to 3%, maybe where you see the likely kind of swing factors within the range there?

Will do. Trey, thanks for the question. I think that's a good one. Let me go through the big buckets and give you a snapshot of what I think that's going to look like.

So if we start with infrastructure, then if we look at it for last year, it was about 37% of our business. Look, see that up mid-single digits. I think that's going to be a good steady story this year. I think that story can actually be better this year than we're guiding right now.

You know, keep in mind, we've said 2026 should see those peak IIJA funds come in. So, again, if that peaks the way that we think, that's gonna be important. But keep in mind, you still got 50% of the funds that have yet to flow. So '26 should be an attractive year.

But, frankly, so should '27. So, you know, I think that's really a big piece of it. You know, I think the other piece that we spoke of before, you know, if we're looking at our top 10 states, and I think this is an important thing to keep in mind, you know, we're looking at their overall DOT budgets up about 7% from the prior year. So, again, we're looking broadly across Martin Marietta, you know those top 10 states, tend to matter disproportionately. Again, their budgets look very, very good.

I've spoken in one of the earlier questions about what we've seen at the local level relative to referendums. You know, a lot of those got passed last November. Obviously, the one that we spoke of in Mecklenburg County, which basically is Charlotte, is an important one for us because that's a vital market to Martin Marietta. I mean, that kind of takes me through at least the infrastructure piece of it, and I do think there's probably some modest upside there.

Nonres, you know, if we back away from it, again, 35% of our business last year, it's interesting to me to look at it because if we're looking at total square footage starts, yeah, they're still 20% below the prior peak. Even with the holy trinity of data centers, energy, and warehousing all moving in the right direction. But the thing that I'm taken by is, you know, what I'm seeing right now in demand for data centers simply remains really strong. I mean, we talked about what's going on with Stargate and Abilene.

We talked about Google and their investments in South Carolina. You know, Meta has recently reaffirmed their $65 billion CapEx investments in Louisiana. I mean, these are big numbers. But then what I like are stories like this.

I mean, Project Jade, which is a large data center that's really just got underway in Laramie County, Wyoming in December. That's gonna be an enormous project, and we've got the closest proximate quarry of size to that. So I think all that's gonna be impressive for a while. But what we're seeing is what you would have imagined, and I think this may supply more upside as well.

And what we're seeing in energy and its needs are pretty significant. So the US power demand is expected to rise 25% by 2030. And, again, these are all compared with 2023 levels. If we're saying from 2023 to 2050, gonna have to go up by 80%. So, again, if you're looking at something that can be a lever in this, that's certainly one of them.

As we're thinking about data centers and we're thinking about energy. Texas, which is an important state for us where we're the largest aggregates producer, is clearly a leader in that. But importantly, and, Trey, you'll remember when we were talking about VC Summer. Fifteen and, you know, ten and fifteen years ago as far as the nuclear plant in South Carolina.

Now you've got Brookfield Asset Management who's come in there basically in a public-private partnership with Westinghouse. And they're basically looking to build large-scale nuclear reactors to support the growing demand in that state and beyond. The other thing that we're seeing, and, frankly, this is overdue, from my perspective, is we're seeing LNG projects coming back as well. So, you know, you're getting closer to the Gulf, Port Arthur LNG, is starting to move.

So, again, do I think there's upside on data centers? Yeah. I do. I think there's upside on energy?

I do. But here's the other piece of it that's very different than I would have spoken to you about last year at the same time, and that is what's going on with distribution and warehousing. So, again, we continue to see in a number of our markets Amazon is growing. We've seen good examples of Walmart distribution centers coming in, Ross distribution centers, Delhaize, which is the owner of Food Lion in our part of the world, is building a nice distribution center as well.

And we're seeing big pharma making nice moves. Novo Nordisk, J&J, Eli Lilly. So, again, as I'm looking at public, I see nice momentum and potential upside. As I'm looking at heavy nonres, I'm seeing nice momentum and I'm seeing upside.

If I'm seeing places that, frankly, will be relatively flat, I mean, that's where residential comes to the top of the pole. Right? Look. You heard me say that I think we're likely to see declining interest rates.

I think that's gonna be helpful on res. I think that's gonna be helpful most importantly on single-family res. At the same time, you saw the latest starts. They're really not very heady at all.

But the need is acute. And I think one thing to watch is what's gonna happen with adjustable mortgage rates and how popular do those become again even ahead of watching interest rates decline? So do I think there's upside in public? Yeah.

Do I think there's upside in data? Yeah. And do I think housing's likely to be relatively flattish with likely upside moving into next year? Yeah.

I do. And I think as we think longer term, when you see that last turn really come to rest, I think that really puts some accelerant to pricing as well. So, Trey, I tried to take you through the three big end uses and tried to give you the ups and downs and some of the whys.

Yep. Well, thank you for all the color, Ward. Super helpful, and I'll pass it on. Best of luck.

Thanks, Trey.

And our next question comes from the line of Anthony Pettinari with Citi. Your line is open.

Hi. This is Asher Sonan on for Anthony. Thanks for taking my question. Just based on the guide you put out, it looks like the 250 basis points price-cost spread guide is kind of still intact.

I just was hoping you could walk us through what you expect for your key cost buckets in 2026, like labor, raw materials, energy, maintenance, or etcetera? But I guess, also, really, what gives you confidence that you can kind of keep down? Is it that you're seeing, you know, lower inflation or maybe there's some other levers you're pulling?

Thanks for the question. I would say several things. One, look, we're seeing inflation running, let's call it 3.5%-ish. I mean, if we think about the things that will be involved in clearly, labor is gonna be a piece of that.

We actually feel like supplies and some of those things will continue to move a bit. But at the same time, we don't see a lot of significant tariff activity in our space because so much of what we're buying in our markets tend to be uniquely the United States all by themselves. If we're looking at the quarter itself, I would say several things were moving around in the quarter. One, we just had a degree of higher external freight costs.

And what I mean by that is we had increased yard activity, and so if we're just looking at the transfer activity to yard locations themselves, that actually took up costs in ways that in many respects are more optical than real. And the other issue that we had in the quarter all by itself, we did have, as we're going out to California and some parts in the West, and restructuring some of our business, we had some one-time inventory write-offs that will not recur. And so if we're looking at the overall cost environment, I think it's actually in a pretty good place. That said, as Michael commented in his remarks, we want to make sure that we're looking at all of our divisions and all of our through a really clear-eyed fashion to make sure that we're lining up costs with what the market demands are today.

So keep in mind, since 2022, you know, volumes have been flattish to certainly not up in any notable way since 2022. He mentioned that we had a pilot project that we had gone through one division late last year. The results of that were really very significant and helpful, and we're looking at that more broadly across the portfolio. So, again, I hope that answered your question.

Thanks. I'll turn it over.

And our next question comes from the line of Philip Ng with Jefferies. Your line is open.

Hey, guys. It's Jesse on for Phil. Just on the specialty side, it looks like, obviously, Premier's having a bit of a mix impact. Can you just talk about some of the initiatives you can kind of do to get the profitability back to kind of legacy levels there and kind of a timeline associated with that? Thanks.

Yeah. No. What I would say on Premier or just specialties as a whole, Premier is a margin dilutive acquisition to the specialties organic business. But what you're seeing in the guide for next year, the $160 million of gross profit, that's the organic business that has run so well and so hard over the last three years.

Again, we're taking a measured guide there. We're assuming that consolidates a bit. A lot of the contribution and gross profit growth coming into the specialty segment is coming from the seven months of contribution from the Premier acquisition that wasn't in 2025. And just in terms of cadence on specialties, there's really not a whole lot of seasonality in that business. So you can assume each quarter is roughly the same split for that $160 million of gross profit.

But I think that margin level that's implied is a consistent margin level now for a full year with the pro forma business, including Premier.

Great. Thanks. I'll turn it over.

And our next question comes from the line of Angel Castillo with Morgan Stanley. Your line is open.

Hi, good morning, and thanks for taking my question. Just wanted to ask, I guess, two-part question. First, could you just comment on the kind of, I guess, quote-to-order conversion rates and how that has been evolving? As you think about the fourth quarter and really in the first couple of months here of the year, whether you're seeing any shifts of projects or according to the conversion to order improving in any material way?

And then Ward, you gave very good helpful color across all the kind of key end markets and the, you know, pockets where we might be seeing some potential for improvement. So I was just curious, could you size how much data centers is of your backlog or your orders today? And then also maybe comment on manufacturing in particular. I think that's one area where we've been seeing on your slide it's listed as more of a yellow or I guess orange.

And then I think in the U.S. Census data, it's one of the buckets that seems to be actually seeing accelerating declines. I'm just curious what you're seeing on your side.

Angel, thanks for the question. I would say several things. One, obviously part of what we're doing right now is using Precise IQ large in the East. You'll see that rolled out across the company and pretty much in place by half year.

We think that's important because part of what we've seen is we've used Precise IQ is it does several things. One, it clearly gives our sales team the ability to respond in a very quick, very agile, but very accurate way to our customers. The other thing that we've seen is our win rate utilizing that has amped up pretty nicely. So I think answering your question directly, is the quoting and the yield looking attractive from where we sit right now?

Yes. And do I think it's going to be more attractive as Precise IQ rolls out across the enterprise? So I think you can get a double yes on that. As we go to data centers and look at that tonnage, look.

That tonnage is right now, frankly, a few million tons a year. I mean, and we're talking about a business that's gonna be at least if we're going on last year's numbers, let's call it close to 200 million. Obviously, notably larger than that, when we come back with Quickrete. That said, it's growing at a very fast rate.

I mean, so it's growing at a multi-double-digit rate right now. And we anticipate that that's likely to persist. Equally, if we go to some of the other nonres areas that I spoke to, we continue to see, at least in our markets, manufacturing moving in the right direction. I mean, that's not gonna be an immediate switch that's gonna go.

If we're looking at it overall, I think that's the trend that we're seeing. And, Michael, anything you want to add to any of that?

Yeah. I think just to give you some color on Q4, the categories that we call the threes, they all represent about 3% of our overall shipments, our data centers now, distribution centers and warehouses, which is down from a peak of closer to 7% or 8%, and manufacturing, and power gen. Of those categories, data centers were growing at about a 60% clip. Warehouses themselves coming off the inflection point were growing at about 40%.

So that just gives you a sense for those two categories that are 3% of our overall shipments to growth rates. And manufacturing, given some of what we're seeing in pharma, that's taking over for some of the decline in large semiconductor and battery facilities, the rate of decline in Q4 was the lowest rate of decline for the year. So we're hopeful that manufacturing starts to inflect here in 2026 similar to what we saw in warehouses in 2025. Hope that helps, Angel.

Thank you.

And our next question comes from the line of Tyler Brown with Raymond James. Your line is open.

Hey. Good morning, guys.

Hey, Tyler.

Hey, Ward. You know, there's been a lot of chatter out in the market about pricing. You talked a little bit about it, but can you just kind of give your thoughts about the state of pricing as you see it? Are you seeing anything geographically dispersion-wise?

Just any bigger picture thoughts about hitting that five and a half percent ASP growth through 2030, which I think is what you laid out at the Analyst Day? Thanks.

Tyler, thanks for the question. And I would say several things. One, no surprises from where I'm sitting. I mean, I think everything that we talked about at the Capital Markets Day is pretty consistent with what we put in our documents today.

You know, if I look just at the quarter just ended, I mean, all divisions posted mid-single-digit price increases. It was interesting in Q4 because actually we had a few project delays in and around, for example, Charlotte and Greensboro. And those are actually, from a pricing perspective, pretty attractive markets. So we actually saw volume growth in the East in Q4, modestly below the rest of the company.

So that actually gives us an optical headwind if you think about what that means. And if you think about the guide, I mean, look at it in these terms. We're basically talking to five-ish on price. We're talking to two-ish on volume.

And that's exactly what Q4 looked like. And Q4 was just a record. So as I think about taking that and really casting that forward, I don't see anything in that that gives me degrees of pause. So, again, I think we've got a nice rhythm and cadence on where we're going.

And the other piece that strikes me relative to your question on pricing in particular, Tyler, if we go back to the conversation that I had relative to end users. I said, look. Input's looking good and may look a little better. Nonres is looking good and may look a little better, at least on the heavy side.

And we said, housing, you know, not so much, at least this year. Once that housing starts coming through, Tyler, and I think you and I know that it will. And I think when it does, it's gonna particularly shine in Martin Marietta markets simply because of the way we built this business. Again, I think pricing, looking at the way that we talked about it last September and today, relative to 2026, looks very steady.

And I think if we see private start to move the way that I think private's going to move, I think that's actually very helpful to pricing even going forward. So, again, I hope that responded to your question, Tyler.

Yep. That's very helpful. Thanks, guys. Appreciate it.

Take care.

And our next question comes from the line of Garik Shmois with Loop Capital. Your line is open.

Just wanted to piggyback on the last question, but ask it from a gross profit per ton perspective. I think you're guiding to 8% growth at the midpoint of guidance this year, I think, relative to SOAR 2030. I think that was closer to go double digits. So just wondering if the variance there on the volume side. Is it related to housing coming back?

And any thoughts on gross profit per ton and the level of conservatism in the guidance this year?

Yeah. Hey. Happy to take that question. I think you're saying the implied gross profit per ton is around the 9% versus double digits.

What I would say is ag gross profit dollars are at the midpoint of 11%. And what Ward said is we were taking a measured approach to the guide. In terms of not only probably volume, but the other place where we're feeling a bit measured is on the cost side. So underlying inflation, as Ward mentioned, is running at about 3.5%.

Our implied COGS per tonne guide is 3%. But that's only given about 50 bps of operating leverage to the 2% volume. So we would expect to have more operating leverage than that. And to put it in perspective with some sensitivities, each 1% reduction in COGS per ton inflation holding everything else constant in our guide is about another $35 million to ag gross profit.

So if there's upside, it's likely on the COGS side as we continue to take some of the lessons learned from our pilot regions network optimization efforts and roll that out across the company. But that is not contemplated in our guide here in February.

Okay. Perfect. Thank you very much.

Thank you, Garik.

And our next question comes from the line of Ivan Yi with Wolfe Research. Your line is open.

Thanks. Good morning, guys. Just wanna go back to the price-cost spread you were talking about. Can you just comment on that trajectory going forward? Your price is expected to be close to plus 5% in 2026. If the price-cost spread didn't narrow this year, when can it reaccelerate?

Thank you for the question. Look, as Michael and I both, I think we've taken a very measured view of what that's going to look like this year. I think what we're seeing, what we talked about was seeing it more than that as we went through the SOAR 2030 period. So we didn't necessarily think we're gonna come out of the gate at that level.

We think it's gonna continue to build, and we believe given the cost profile that we have and where I think we'll actually drive that, and what I believe is likely to happen to volumes over the coming years as private construction has a degree of recovery. We don't look at that price-cost spread that we discussed in September and have any concerns about that. We feel very confident in our ability to hit that. And I think if we're doing what we're doing in this year, and it builds into next year in the way that we think, I have a high degree of confidence that it will.

I mean, I'm not losing any sleep over what that's going to look like.

Thank you.

You're welcome.

And our next question comes from the line of Keith Hughes with Truist Securities. Your line is open.

Thank you. I just want to switch back to the IIJA. You had talked about temporary measures. I'm thinking maybe continuing resolutions. We've seen a lot of those. On these highway bills expiring. If we go down that path and we don't get a new plan, what does the continuing resolution do to your business either positive or negative?

You know what, Keith, that's a good question. I don't think it does anything negative to the business at all, because again, if we ended up with a CR, it's going to continue funding at the record level of $72.1 billion. So it would continue basically at a record level. And, again, as we discussed, as important as the highway bill is, so is the state DOT posture.

So if we're looking at a very healthy state DOT posture, so set up 7% on average on our states as we head into the New Year, and in a worst-case scenario, again, that I don't believe we're gonna be confronted with, that we end up with a CR, just end up at the same level that we are. So if you go back to the notion that I said, look. I think there's upside in what we're gonna see in public this year. I think you're gonna see another really strong year in public next year simply because you still got 50% of the funds that need to work their way through.

So, again, I'm not looking at September 30 with any form of foreboding. That's gonna be something that's gonna be significant pretty bad at all to our business. I think we'll have a new bill. I think the new bill will have more highways, bridges, roads, and streets.

I think it'll be on time. If we don't, I think the beat goes on.

I hear you. One of the big investors think, the ones that have really studied this to get fearful of is not so much the spending falls off dramatically in '27, but you know, the ARTBA projection shows falling infrastructure spending in '27. If you get a CR, would the market not be flat to up in '27 in that scenario?

I think if you got a CR, it would probably be relatively flat to modestly up again because you'd have the same degree of funding. And you're gonna have state DOTs picking up. Again. So I think the biggest piece of our business, as I said, that was not quite 40% of our business this year would continue to be ballast in the boat.

Okay. Great. Thanks a lot, Ward.

Thank you, Keith.

And our next question comes from the line of Brian Brophy with Stifel. Your line is open.

Thanks. Good morning, everybody. Appreciate you taking the question. You referenced the network optimization initiative a few times.

I guess, any color on the pilot that you referenced and how that unfolded and any feedback on what this could mean for the cost profile or margin profile for the total business as it's fully rolled out through the enterprise? And how can we need to get about the timing of some of the benefits? Thanks.

Let me talk to you broadly about what it was, and Michael can come back and add some color on what it might mean. I think that's probably a good way to do it. So if we think about what it was, what it means is if we've got a network of quarries that are servicing our customers, but in some instances, because volume is not running at particularly peaky levels today, we can look and idle or not run a site as hard and run another site much harder, getting leverage on the volume that's going through there and taking a look at which ones may be the most efficient in any given market. That's what we're talking about doing.

And, of course, when we do that, we do it with the customer top of mind. Because we have to make sure we're in a position to take care of their business needs and make sure we're in a position to do that without creating degrees of supply disruption or additional cost in their world from more transportation. So what we found, and we looked at this in the West, in particular, is where we had degrees of market presence that allowed us to do that. And we could temporarily do something with the site and make sure we're using other sites more productively.

It helped in multiple different ways. So with that, I'll ask Michael to speak to what it could potentially mean. And, obviously, we're gonna talk to you more about this as the year goes on.

Yeah. No. I think starting with the pilot is important. So like we said, we saw that flow through in Q4. So measures implemented in Q3 of last year.

And that meant COGS per ton declining year over year in that pilot market. So we had the benefit of that. That was overcoming the restructuring charges that are in our adjusted EBITDA. Not the full amount, but some of that was hitting ag gross profit in that pilot region where they still had declining COGS per ton, to put it in perspective, pulling that out.

So the opportunity set is rather large. We want to complete our assessment across the entire footprint before we come back and quantify it. And we expect to have that quantification done by midyear, and that's when we will revisit the guide and update our COGS per ton assumption accordingly. But I think it's important to note we're guiding to 3% COGS per ton in the implied guide.

If you exclude the external freight, which is just pass-through freight to the customer, so not gross profit impacting, and if you exclude those restructuring charges that hit ag gross profit, our underlying COGS per ton fully loaded with depreciation and otherwise, was growing at a 2.7% rate in Q4. So we're guiding modestly above that. But that'll give you a sense of some of the conservatism that we feel we've included in this early guide.

Really appreciate it. Thank you.

And our next question comes from the line of Timna Tanners with Wells Fargo.

Yeah. Hey. Good morning. Thanks for getting us in. Wanted to just ask if you could share anything with us about the timing of the Quickrete transfer closing, and any updated thoughts on the pipeline would be great. Thank you.

So thank you, Timna. Nice to hear your voice. I would say several things. One, we had put out a release at the end of the year saying we anticipated closing in Q1. We still do.

The long pole in the tent is real estate. And it was interesting, Timna, because we went through the regulatory piece of it probably quicker than we or anybody else would have anticipated. So right now and, of course, the agreement itself is publicly filed, so you have an opportunity to read that. And what you'll see in the agreement is there are a series of closing conditions and many of them evolve around the real estate.

Because if you think about what a big 1031 exchange is, to get the tax-deferred treatment, you know, you're having to line up assets. And, of course, on the Quickrete side and on our side, there are certain sites that would simply be more material than others. So we're going through the process of land use and surveying and getting title insurance. And that simply takes some time.

But, again, our anticipation continues to be that we will get that closed here in the first quarter. I think the other part of your question was relative was Timna, was it relative to pricing?

No. It's about anything updated on your pipeline or how you're seeing the opportunities and acquisitions.

Oh, just on that outlook. Look. The short answer is that's gonna continue to be a nice attractive driver for Martin Marietta. We have been and continue to be engaged in a number of significant conversations.

As I think I indicated at our Investor Day or Capital Markets Day, you know, people should expect us to be in the world of doing about a billion dollars worth of transactions a year, and that's never going to be linear, Timna. So look. Is it gonna be a billion one year? Yeah.

Could it be four the next? The answer is it could be. Depending opportunistically on what comes along, but the pipeline continues to be very attractive, and it's obviously something that I think we're good at. And we've added a lot of value with, and we'll continue to pursue.

Thank you.

Thank you.

And our next question comes from the line of Michael Dudas with Vertical. Your line is open.

Morning, gentlemen. Jacklyn.

Hey, Mike.

Yeah. Hey, Ward. You give great insight. Outlook for the business and the industry, but is it a macro? Is it regulatory? Is there sentiment concerns? Because there are some people who are thinking macro is not as you know, right as others. What's the thing, what one or things that you are concerned about that would maybe impact how the year flows out? Anything top of mind or anything specific?

Mike, thanks for the question. Look. I'll tell you what, if you could put me on mute, that would help. I'm hearing an echo.

Look. I think of the year through several different lenses. When I think of it through end uses, which we've spoken through, and, again, I think we've taken a really measured view on the end users. I look at it through the lens of commercial.

And, again, I think commercially where this business is performing, is right in line with what we had indicated at the Capital Markets Day. I look at it through the lens of cost and through the lens of inflation, and as Michael just took you through, when we really go through and look at it from a granular basis how that performed, and look at Q4, and what we think can happen actually with that. As we go through degrees of really looking at where we're operating, why. I don't see anything on the cost side that causes me concern.

Regulatorily, I think actually the nation and the industry is in one of the better places that I've seen in my career, so I don't see something there that causes me any concern. Look. I know there's a lot out there that people look at from a macro perspective that they can become cautious about. The thing that I'm taken by is this is a business even in the worst of times, and we're not in the worst of times.

I don't anticipate them. We've always been profitable. We've never cut or suspended the dividend. And, you know, we're in a place that we're producing and selling this past year about 200 million tons of stone.

And that's about where we were in 2005 and 2006, except we've added, let's call it, 50, 55 million tons of business. So what we have ahead of us from a capacity perspective is impressive, and what we're doing with free cash flow right now is impressive. And I think if we're doing that in a relatively muted volume environment, what that tells me is if we're right on what's coming ahead of us, it can be really impressive. So I'm not seeing a lot right now that's causing me any degree of angst.

And our next question comes from the line of David MacGregor with Longbow Research. Your line is open.

Yeah. Good morning, everyone, and thanks for squeezing me in. Ward, I just wanted to ask you about your value over volume strategy. And just, I guess, the extent to which that may be put to a test this year.

There's been a lot of weakness downstream ready-mixed business. It's, you know, it's a pretty difficult business these days. And I'm just wondering about the risk of price pressure from below just due to weak profitability in that segment of your market and consolidation amongst those players. Just how that could potentially manifest into your business.

Yes, thanks for the question, David. Look, the way it's working right now, if you think about it, asphalt and most of those businesses are getting January 1 price increases, degrees of concrete businesses are getting January 1 price increases, and some of them are getting April 1 increases. So if you think about what that means, it's pretty similar to last year. And, of course, the conversations have already been had.

People know where we are going into the New Year. We have not baked mid-years into what we've done. If I'm right on what could happen relative to public and degrees of heavy nonres, you know, there may be some opportunities for mid-years. You know, keep in mind too, David, you know, after we've closed, well, after we've closed Quickrete and then give you the forecast on Minnesota, you know, both those businesses tend to have lower ASPs than Martin Marietta.

So that's gonna give you an optical headwind when we put those into our forecast going forward. But, again, you know, my view, we go back to the Capital Markets Day, is we're not gonna stay chronically at double digits. We're not going to go back, in my view, to where we were, you know, a decade ago from a percentage perspective. We're gonna land somewhere in the middle.

And the swing factor on that is gonna be what happens with volume. So I think what we're guiding to is very consistent with that. And, again, I think there's probably upside risk to it relative to what could happen with mid-years. And what can happen as volume returns to it.

So, I hope that answers your question. We're pretty resilient around assuring that we're getting appropriate value for our products. It's hard to buy these businesses. It's hard to permit these businesses.

It's hard to put a spec product on the ground. We want to make sure we're getting appropriate value when we do.

Got it. Thanks very much.

Thank you, David.

And our next question comes from the line of Brent Thielman with D.A. Davidson. Your line is open.

Yep. Thanks. Ward, it seems to me housing could be one of the more dynamic markets for you in the next year or two. So do you sort of think back on the business over time, how should we think about sort of this lag from permits and starts to having some noticeable sort of impact to your business?

You know, I've always looked at that historically as having probably a three or four-month lag. I'm not sure it's gonna be that long this time, Brent. So, again, part of what you're not seeing is what the square footage looks like in those numbers. And, again, as we continue to see big square footage in nonres, rollout at pretty big numbers, I think that's gonna be a big consumer of stone.

And, again, I think the public side of this is gonna be healthy, and it's gonna be healthy for a while yet. So I'm not seeing, I wouldn't let those numbers and any purported delays drive my model in either particular direction, Brent.

Okay. Thank you.

And our final question comes from the line of Judah Aronovitz with UBS. Your line is open.

Hi. Good morning. Thanks for taking my question. Could you just talk about your confidence level in the 5% pricing for '26? You know, is that based on pricing already in place, or is there maybe some more work to do to achieve that, you know, maybe based on bid work? And then if you could comment on if there's any mixed headwind from base or any other, puts and takes? Thank you.

Thanks for the question. That's largely for what's in place. I mean, we've had the conversations with our customers that started last year. I think we've got a pretty good feel for what that is.

As I indicated before, this is more of an optical issue than a real issue, but, obviously, if we do M&A, and they come in at a lower average selling price than our heritage selling price, you know, that can cause an optical issue. You know, the other thing that you just never have a sense for, and it's almost a quarter-by-quarter issue, and you saw it in Q4. You know, I indicated that the East Region in Q4 actually because of what had happened, with a couple of project delays in weather, actually saw less tonnage go in Q4 than our other divisions. And that obviously gave us a mix headwind from a geographic mix perspective.

It's certainly possible that we could continue having degrees of a mix headwind as well. Because if you're thinking about some of these big data centers, and the fact that they're gonna need oftentimes an enormous amount of base stone as they're going in and building facilities, base is gonna go out typically, let's call it a 30% ASP lower than clean stone. The thing is when you put down base stone, at some point, you're gonna put clean stone on top of it. So it's nothing that's dislocating in any respect.

I think it's gonna be incumbent on us to make sure we're talking with you very carefully each quarter about what geographic mix looks like and what product mix looks like. Because if you don't understand those two stories, and they are two different ones, it does not give you an accurate view of how well the business is performing in all instances. So yes, we believe the pricing is there. We think there can always be some mix issues.

We think that's more optical than real.

And that concludes our question and answer session. I will now turn the conference back to Mr. Ward Nye for closing remarks.

Abby, thank you for that, and thank you all for attending today's earnings conference call. Over the past five years, deliberate portfolio shaping strengthened our presence in key markets, optimized our product mix, and enhanced our earnings profile. As we transition from the achievements of SOAR 2025 to the disciplined execution of SOAR 2030, which is already underway, we see a well-defined platform for advancing our growth ambitions and delivering enduring shareholder value. Our aggregates-led foundation, complemented by our high-performing specialties business, provides a durable platform uniquely suited to achieve the objectives of our next strategic plan.

With this resilient foundation and a culture built on safety and commercial and operational excellence, we enter the next chapter of SOAR with confidence and clarity of purpose focused on compounding returns and delivering superior sustainable results for our shareholders in 2026 and beyond. We look forward to sharing our first quarter 2026 results in the coming months. As always, we're available for any follow-up questions. Thank you for your time, and continued support of Martin Marietta.

And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.