Eagle Materials Inc. Q2 FY2026 earnings call

Management Statement and Operational Highlights

• Financial Performance: Achieved record revenue of $639 million, gross margin of 31.3%, and EPS of $4.23.
• Strategic Investments: Made significant progress on Laramie, Wyoming plant modernization and expansion, and commenced construction of the Duke, Oklahoma Wallboard plant upgrade.
• Safety Performance: Has a fantastic safety track record, consistently below industry average for total recordable incident rates, with goal of 0 incidents.
• Business Outlook: Cement and aggregates volume increased for the second consecutive quarter, favorable for remainder of fiscal year due to infrastructure spending; Wallboard volumes affected by residential construction pullback, but structural changes aiding stability.
• Capital Allocation: Focus on organic growth projects, share repurchases, and maintaining financial flexibility, with $475 million to $500 million expected for fiscal '26 capital spending.

Segment Performance

• Heavy Materials Sector (includes Cement, Concrete, and Aggregates): Revenue was up 11%, primarily driven by increased cement sales volume and a 24% increase in concrete and aggregates revenue. Operating earnings were also up 11%. Aggregate sales volume was a record, with a 103% increase including acquisitions, and organic aggregate sales volume was up 35%.
• Light Materials Sector (Wallboard): Second quarter revenue decreased 13% to $213 million, reflecting lower Wallboard sales volume and a 2% decrease in Wallboard sales prices. Operating earnings in the sector were down 20% to $78 million, primarily because of lower Wallboard sales volume.

Guidance

• Fiscal '26 Capital Spending: Expected to be in the range of $475 million to $500 million, driven by Mountain Cement and Duke Wallboard plant modernization.
• Fiscal '27 and Beyond: Expect capital spending to step down to $400 million to $425 million in fiscal '27, with further significant decrease in fiscal '28 as projects near completion. The One Big Beautiful Bill allows accelerated depreciation on investments, reducing cash taxes paid.

Risks

• No specific risks explicitly detailed in the transcript, but general risks include potential fluctuations in the construction market, regulatory changes affecting operations, and uncertainties related to residential construction demand.

Question and Answer

Q: On Wallboard volume, down almost 14% in the quarter after seeing some outperformance over the last few quarters. Any color on directionally how we should be thinking about the demand drivers here?

A: Builders pulled back in July and August, trailing 12-month Wallboard demand near late 90s levels with 25% more people in the US, indicating long-term growth potential despite near-term challenges.

Q: On cement volume, drivers and outlook?

A: Driven by infrastructure spending and private nonres, volumes positive, cautiously optimistic for remainder of fiscal year despite winter months.

Q: On organic aggregates volume up 35% in the quarter. Any particular drivers or sort of onetime projects to call out there?

A: Growth from acquisitions and internal capital improvements; will continue to focus on growing the aggregates segment through acquisitions or internal improvements.

Q: On cement ASP and demand backlogs?

A: Oil well cement is a smaller part of the business; Texas saw price degradation, but improved bidding activity for customers going into next year.

Q: On CapEx for Duke and Laramie, tax impact?

A: Fiscal '26 CapEx expected $475-500M, fiscal '27 CapEx to step down, One Big Beautiful Bill allows accelerated depreciation reducing cash taxes paid on investments.