We permit the publication of our auditors’ report, provided the report is published in full only and is accompanied by the full financial statements to which our auditors’ report relates, and is only published on an access-controlled page on your website, to enable users to verify that an auditors’ report by independent accountants has been commissioned by the directors and issued. Such permission to publish is given by us without accepting or assuming any responsibility or liability to any third party users save where we have agreed terms with them in writing.

Our consent is given on condition that before any third party accesses our auditors’ report via the webpage they first document their agreement to the following terms of access to our report via a click-through webpage with an 'I accept' button. The terms to be included on your website are as follows:

I accept and agree for and on behalf of myself and the Trust I represent (each a "recipient") that:

  1. PricewaterhouseCoopers LLP (“PwC”) accepts no liability (including liability for negligence) to each recipient in relation to PwC’s report. The report is provided to each recipient for information purposes only. If a recipient relies on PwC’s report, it does so entirely at its own risk;
  2. No recipient will bring a claim against PwC which relates to the access to the report by a recipient;
  3. Neither PwC’s report, nor information obtained from it, may be made available to anyone else without PwC’s prior written consent, except where required by law or regulation; and
  4. PwC’s report was prepared with Hermes Property Unit Trust's interests in mind. It was not prepared with any recipient's interests in mind or for its use. PwC’s report is not a substitute for any enquiries that a recipient should make. The financial statements are as at 25 March 2017, and thus PwC’s auditors’ report is based on historical information. Any projection of such information or PwC’s opinion thereon to future periods is subject to the risk that changes may occur after the reports are issued and the description of controls may no longer accurately portray the system of internal control. For these reasons, such projection of information to future periods would be inappropriate.
  5. PwC will be entitled to the benefit of and to enforce these terms.
I accept

1. Select your country

  • United Kingdom
  • Austria
  • Australia
  • Belgium
  • Denmark
  • Finland
  • France
  • Germany
  • Iceland
  • Ireland
  • Italy
  • Luxembourg
  • Netherlands
  • Norway
  • Singapore
  • Spain
  • Sweden
  • Switzerland
  • USA
  • Other

2. Select your investor type

  • Financial Advisor
  • Discretionary Investment Manager
  • Wealth Manager
  • Family Office
  • Institutional Investor
  • Investment Consultant
  • Charity, Foundation & Endowment Investor
  • Retail Investor
  • Press
  • None of the above

3. Accept our terms and conditions

By clicking Proceed I confirm I have read the important information and agree to the terms of use.


The Hermes Investment Management website uses cookies to remember your preferences and help us improve the site.
By proceeding, you agree to cookies being placed on your computer.
Read our privacy and cookie policy.

Aggregates price-setter Martin Marietta to benefit from US infrastructure spend

Home / Press Centre / Aggregates price-setter Martin Marietta to benefit from US infrastructure spend

Mark Sherlock, CFA, Head of US Equities
22 September 2016
Small and Mid Cap

Mark Sherlock, Lead Portfolio Manager of the Hermes US SMID Equity Fund at Hermes Investment Management, believes aggregates giant Martin Marietta Materials exhibits consistently strong pricing power and is well-placed to benefit from greater infrastructure spending in the US following years of under-investment in the nation’s highways, making it an attractive long-term holding.

Pricing power
Martin Marietta is the second-largest aggregates and heavy building materials company in the US. The firm makes materials used for roads, footpaths and building foundations and has operations in 26 US states, Canada and the Caribbean. 

Since it is uneconomical to transport materials more than 50 miles by truck, the aggregates sector consists of a number of local oligopolies. The aggregates sector also has high barriers to entry; in an industry which is consolidating, only 10 new quarries have been approved in the last decade, benefiting existing operators.

Martin Marietta has achieved strong pricing power within this market structure due to its dominance in many geographical areas – it has set prices that have on average risen more than 3% each year since 1970, with no declines during recessions.

Positioned for an infrastructure boom
There are a number of dynamics supporting the long-term investment case for Martin Marietta. Population growth is resulting in increased per capita aggregates consumption, population density is creating demand for greater infrastructure networks, and the superior finances of states in which the company operates supports infrastructure spending. The average lifespan of a federal road in the US is nine years, and we expect the company to provide greater volumes of materials as more money is spent restoring highways and infrastructure. 

The firm itself has the potential to expand its operations in both Texas and Colorado, which provided half of its 2015 sales, while its strong cash flows enable it to buy back shares and make acquisitions in future. According to one analyst note, EBITDA could double to $1.7bn-2bn by 2020[1].

Announcing its results for the first half of 2016, the group reported record net sales and net earnings. The first multi-year US highway bill in a decade, in addition to improving employment and substantial backlogs for contractors, should fuel growth as the recovery in the nation’s construction industry continues. 

Sustainable growth 
We seek companies with a strong durable competitive advantage that are trading at a discount to their intrinsic value. As a high-quality cyclical stock, Martin Marietta meets our criteria because it is among the top one or two players in its respective markets, and its pricing power provides strong potential for sustainable future growth.

We first invested in the stock in 2012, as we believed the materials sector could benefit from a recovery in capital expenditure amid the US economic recovery. In 2014 we increased our holding as the earnings potential of the business became clearer, and we still find the company’s fundamentals attractive.

Taking the high road: Martin Marietta stock price, Oct 2012 to Aug 2016



We hold stocks for the long term, and over the next three-to-five years we expect a combination of greater volumes, high margins and rising prices to increase the company’s profitability. Given the structural case for highways investment in the future, we think Martin Marietta should continue to grow profits in the long term. 

[1] Martin Marietta: Potential for EBITDA to double. Increased delivery of aggregates by rail, by Mike Betts. Published by Jefferies International Limited in 2016

Share this post:
Mark Sherlock, CFA Head of US Equities

Mark joined the Hermes US SMID team in February 2009 as co-manager of the Hermes US SMID Cap strategy and became lead manager in October 2013. He became co-manager of the US All Cap strategy in May 2015 and in October 2017 was appointed Head of US Equities. Mark initially joined Hermes in 2005 as an analyst and fund manager on the UK Focus Fund. Prior to this, he was an investment analyst at Rio Tinto Pension Fund, where he had responsibility for the small- and mid-cap portion of the portfolio. Mark qualified as a Chartered Accountant with PricewaterhouseCoopers in 2002. He has a degree in Politics from Durham University, is a CFA charterholder and a Fellow of ICAEW.

Read all articles by Mark Sherlock, CFA

Find posts by author

  • Alex Knox, ACA
  • Amy Wilson
  • Andrew Jackson
  • Andrew Parry
  • Claire Gavini
  • Dr Michael Viehs
  • Emeric Chenebaux
  • Eoin Murray
  • Geoffrey Wan, CFA
  • Harriet Steel
  • Ilana Elbim
  • Ingrid Holmes
  • Jonathan Pines, CFA
  • Joseph Buckley
  • Kimberley Lewis
  • Louise Dudley
  • Mark Sherlock, CFA
  • Martin Todd
  • Maxime Le Floch, CFA
  • Michael Russell, CFA
  • Michael Vaughan
  • Neil Williams
  • Nick Spooner
  • Nina Röhrbein
  • Peter Hofbauer
  • Philip Nell
  • Saker Nusseibeh
  • Silvia Dall’Angelo
  • Tatiana Bosteels
  • Tim Crockford
  • Tommaso Mancuso
  • Yasmin Chowdhury

Find posts by category

  • small and mid cap

Press contacts