Eagle Materials Inc Q4 FY2026 Earnings Call

Good day, everyone, and welcome to Eagle Materials' fourth quarter and fiscal 2026 earnings conference call. This call is being recorded. At this time, I would like to turn the call over to Eagle's President and Chief Executive Officer, Mr. Michael Hack. Mr. Hack, please go ahead.

Thank you, Bailey, and welcome, everyone. Joining me today are Craig Kessler, our Chief Financial Officer, and Alex Haddock, Senior Vice President of Investor Relations, Strategy, Incorporated. If there will be a slide presentation made in connection with it, please go to eaglematerials.com and click on the link to the webcast. While you're accessing the slides, please note that the first slide covers our cautionary disclosure regarding forward-looking statements made during this call. These statements are subject to risks and uncertainties that could cause results to differ from those discussed during the call. For further information, please refer to this disclosure, which is also included at the end of our press release. We asked today to discuss execution at Eagle Materials. In fiscal 2026, during unusually high uncertainty in the economic environment, the Eagle team delivered strong financial and operational results. For the fifth straight year, we generated record revenue, delivering $2.3 billion of annual revenue and strong earnings per share of $13.16. We also returned over $400 million of cash. Eagle has a long track record of consistently investing where it matters. Let me start with the safety of our people. For the past five years, our combined businesses have, on average, maintained a total recordable incident rate below the industry average. In fiscal 2026, we also increased our near-miss hazard observations, the best leading indicator to prevent safety incidents, by 24%. With regards to ensuring the long-term sustainability of our operations, we have completed or started several very strategic investments. The most notable are, over the next 18 months, EGLE will complete the modernization of one of our oldest cement plants, Mountain Cement, and one of our oldest wallboard plants in Oklahoma. These projects show our continued focus on investing in our assets to keep them in like-new condition. The Mountain Cement Plant modernization is approximately 60% complete, and we expect commissioning of the new kiln line to begin in late calendar 2026. Construction on the Duke, Oklahoma wallboard plant is approximately 30% complete, and we expect to commission the new wallboard line in the second half of calendar 2027. These investments will lower our cost structure, improve reliability, and expand the capacity of each plant, which will further increase production flexibility across our plant network and strengthen our already low-cost competitive position. A strategic investment has been in our quarries. The limestone, gypsum, and each quarry and their proximity to their plants is crucial for Eagle's success across all of our business lines. Controlling decades of our primary raw materials gives us a critical competitive advantage in terms of cost and consistent high-quality supply. This is particularly important in periods of cost spikes and supply chain disruptions. It also enables us to maintain a consistent, high-quality product that is reliable for our customers through decades. We have over 50 years, on average, of quarried reserves at each plant, and we have maintained the 50-year average on a rolling basis through land investments. Turning to the macro-level view of our businesses, we could easily get distracted by headline noise and the near-term volatility and become overly focused on the short-term product, disciplined, and maintaining a through-the-cycle view. From that perspective, we are still fundamentally bullish on the structural tailwinds that will continue to support our industries for many cycles to come. These are essential for building and renewal of America's infrastructure, schools, to name some applications. For our core products is trending well below prior peak levels, the U.S. population has grown significantly, are reaching record age levels. Constraint capacity additions in each industry over the medium to long run. We believe that when demand does strengthen, we are well positioned given our low-cost production advantages and our ongoing investments to reinforce those advantages. In fact, we are seeing this play out for Eagle even in the current choppy business environment. In the cement sector, infrastructure and cement-intensive non-residential construction applications are tightening several of our regional markets. Given the federal infrastructure spending still ahead for IIJA, the strength of state-level infrastructure budgets, and the data center projects positively affecting our entire footprint, the volume outlook for our heavy materials businesses remain favorable across our entire footprint. On the cost side of our cement businesses, we are relatively well insulated from energy cost disruptions in the near term, as we already locked in our fiscal 2027 primary fuel costs last winter. On the wallboard side, as we've discussed, the near-term housing outlook is still facing several affordability headwinds. Most notably, we need mortgage rate relief to encourage home inventory turnover, which should translate into normalized new home construction activity. We have seen wallboard sales volumes hold steady from a historical perspective, and most importantly, we have seen relative price stability that is not surprising to us given supply constraints and raw material challenges for the rest of the industry. With our cement and aggregates businesses where volumes are inflecting positively currently and in our wallboard business where in the midterm we believe the volume is poised to rebound as the home building market normalizes, there is a significant runway for earnings across our core business lines. We are well positioned to capitalize on that runway. We have continuously invested in our businesses throughout the cycle to capture upside opportunities as they materialize. As Craig will discuss, we have strengthened our already healthy balance sheet, which, in combination with our excess-free cash flow generation, enables prudent, disciplined investments that further strengthen our competitive position. Strategic and financial criteria mean we will be patient and ensure our inorganic and organic investments will reinforce consistent through-the-cycle growth.

Percent reduction in performance highlighted on the next slide includes our cement and concrete and aggregate segment, 19% increase in 6 million tons contributions from our underscoring healthy underlying demand by continued strength of $1 million from board sales volume and a 4% from continued softness and residential constraint, 19% to $331 million, primarily because of lower wallboard strategic priority. Modernization of our Duke, Oklahoma wallboard, this represents important 90 and easy strategic growth initiatives as well as ongoing sustaining capital investments expected to peak in physical 2027 for commissioning later this calendar year included mid-fiscal 2028, returning capital to shareholders. During fiscal 2026, we returned a total of $414 million through quarterly dividends, $382 million. Flexibility. During the fiscal year, we returned $3 million of 10-year senior notes. The EBITDA leverage ratio was 1.9 times. We will now begin the question and answer session.

to ask a question you may press star then one on your touch tone phone if you were using a speaker phone please pick up your handset before pressing the keys if at any time your question has been addressed and you would like to withdraw the question please press star then two our first question comes from trey grooms with stevens please go ahead good morning craig michael and

Alex, and congrats on the strong finish to the fiscal year, particularly on the margin performance. Maybe starting there, could you walk us through, you know, some of the key puts and takes on the margins across the segments this quarter?

Continue to perform, as Michael mentioned, on the line that continues to perform that's being generated.

Yep, very good. And, you know, on that cement volume strength in the corridor, you know, could you talk a little bit about some of the drivers there and maybe what you're seeing from, you know, just kind of an underlying demand perspective as we move into the seasonally, you know, stronger part of the building season?

And we mentioned data centers. Those have been very strong, big drivers for underlying demand. And as you pointed out, pretty slow construction. you know here and great thank you for that last one for me um cement you know the the pricing was

down slightly um although you know you've now implemented price increases across most of your markets as you've talked about in prior calls could you give us any color to the extent you could on uh you know how those increases are being received how you know how maybe we should think about that cement pricing here again as we're moving into the uh peak construction season i I know you did mention that regionally in some of your markets you are seeing some tightening there. So just any color you might could give us on the cement pricing front.

In markets and down south, we didn't have increases. But, you know, we're in the process of executing on those. We see that in cement when we transfer to terminals. We see that also in wallboard, as we pointed out in the release. But we're in the process of implementing those, and and having a good volume environment is certainly a positive and a support for that

yep all right uh makes sense and thanks a lot for taking my questions i'll pass it on and best of

luck our next question comes from anthony pedinori with city please go ahead uh good morning um just

following up on on trey's question and there's a little bit of in in the release about this but Could you maybe give any more color in terms of quantifying the impact of diesel and freight costs and maybe just kind of remind us how much you're buying directly, how much is sort of like a pass through versus having to raise prices in the open market? Just kind of if you could put any kind of finer point on how a higher diesel environment impacts, you know, both the cement and the wellboard business.

yeah we'll start on the wallboard side maybe it's a little easier to understand so we price wallboard on a delivered basis meaning you know we're responsible for the freight bill and you know sequentially we saw at least about a two dollar maybe pushing three dollar impacts what we call our mill net our net sales price so you know that's that's a combination of customer pickup and and then which you know the cup we cover the freight to the terminal inflation there you know a couple of dollars on a per ton basis and and and so then if you think about you know operating costs we certainly use diesel in the quarry operations we're very fortunate again our quarries are near our facilities meaning the limestone quarries that are feeding cement plants the gypsum quarries that are feeding the wallboard so we try to minimize what we can in terms much more meaningful number okay that's very helpful and then maybe just

one follow-up I know you don't have as much exposure to imports from a cement perspective as some other companies but you know given the rise in fuel costs and challenges in ocean freight are you seeing cement imports come in at a at a higher cost or an equal impact there?

Yes. So, you know, we do import into a couple of markets, into South Texas and into Northern California. And, yes, we've seen, you know, and that has certainly ticked up here recently with all of the issues that are happening globally, not just the factors that are impacting, you know, again, is up.

Okay, that's helpful. I'll turn it over.

Our next question comes from Timna Tanners

with Wells Fargo. Please go ahead. Hey, good morning. There's some views out there that the data center demand is the real reason why Q1 volumes have been so strong. And I'm just wondering what you think of that. I know you mentioned that on the cement side. I know you mentioned that there are easier comps and other factors, but can you drill down a little bit more on what you're

seeing on the data center side and remind us how big it is for your end markets? We continue to see good activity there and things of the data center you know it's just in the beginning in many of our markets more that's certainly you know it's funny you think we talk about private non-res we traditionally thought about schools those types of things you really have that didn't exist whether that's where I think are much more meaningful than what people were expecting

and certainly than we've ever seen our next question comes from Adam Talheimer with Thompson and Davis. Please go ahead.

Hey, good morning, guys. Nice quarter. Craig, can you give a little bit more color on the April 1 cement price increases, and then on the wallboard side, what's the chance that wallboard pricing bottoms here in the near term?

Yeah, so, Adam, I'll start with some of these transportation costs that we've seen over the last several months that, as I mentioned a few moments ago, delivered basis, and that And so we do have a price increase letter out there. Adam, in terms of the cement price a little while ago, post markets for April, there are some. But given the demand environment, we are pushing forward with those April 1st things.

And, Craig, you mentioned CapEx this year is around $500 million, plus or minus. I'm just curious, what would that be if you stripped out the two big capital projects and you just had maintenance CapEx? And then once the two big capital projects are done, what will the maintenance CapEx be in perpetuity?

Yeah, Adam, that's a great question. As you start to look towards fiscal 28, as the Duke will be completed during that year, that number starts to come down significantly. What I call sustaining capital needs are in the $150 million range. The Duke plant finishing in the first half of the year. But as you get into the back half of fiscal 28, absent some other significant project coming up, we would be at that $150 million annual run rate.

Perfect. Thanks, Craig.

Our next question comes from Philip Ng with Jeffries. Please go ahead.

Hey, guys. Congrats on the strong quarter. I think on the wallboard side of things, the previous two quarters, your volumes lagged industry considerably. So that trend reversed pretty nicely. Were there any one-offs that's driving that, like rebates and how contracts were set up? Or are you seeing a nice catch-up here? You're recapping some share at this point.

No, Phil, I don't think anything we would call it. About a year ago, we outperformed the industry because of some regional benefits and things like that. But this was just in the last couple of quarters, we're just a normalization of that. So I'm not surprised to see us performing in line with the industry.

Okay, helpful. Craig, any early read on how trends are shaping up in April, May? I mean, housing's still been pretty choppy, but any color in terms of order patterns on the wallboard side?

Look, as you said, you know, housing, it's hard to – the crystal ball, you know, it's clear. More homes in the U.S. were significantly underbuilt over the next six to nine months, I think, is still a little unclear.

On the cement side, certainly volumes were extremely strong in 2026. you know, admittedly, some of that slapping easier comps, when we look out to April, May, and frankly, 2027, you know, should we expect positive volume growth, you know, given, you know, some of the momentum you're seeing in infrastructure and some of these data center projects? I ask just because the industry data, I think PCA or whatever new format it's called, is anticipating volumes down, call it low single digits, but certainly you're seeing that momentum. So just help us kind of tease out what you're seeing and how we should think about the demand

back throughout this year. Yeah, Phil, it's interesting. We've seen the same, certainly we've seen the national average in 25, but if you did win market by market, region by region, our markets outperform the national average. And so as we head into calendar 26, our fiscal 27, I think we remain optimistic about the underlying demand environment for the reasons we've discussed. We still look for a positive momentum and volume. The ACA has a different number, but we continue to see good momentum there. Do I think we continue to post double-digit type of increases? I'm not suggesting that, but I do think we continue to see improvement. Very helpful. Appreciate it, Craig. Our next question will

come from Timna Tanners with Wells Fargo. Please go ahead. Okay, thanks. I just wanted to also ask

if you could share some thoughts on some of the chatter recently about gas tax holidays on the federal and state level, and also the proposed replacement for IIJA and how you think that'll

impact EGLE in the industry? To continue to extend, you know, it's a little certainly supportive. You know, in terms of the first part around gasoline tax holidays, things like that, you know, those have traditionally been pretty temporary in terms of you see some energy spikes like this and try to compensate for that. But the projects that, you know, we've seen in the funnel that's impacting those projects moving forward.

Okay, appreciate it. And if I could, if you think past the current heavy CapEx cycle, could you remind us about how you're thinking about capital allocation, anything juicy in terms of the pipeline for acquisitions, or if you could give us a high-level characterization of the M&A outlook?

Yeah, I appreciate the question on that. You know, we always look for as long as they make sense and meet our financial return criteria. So, you know, I think we've been clear and will remain clear on our capital allocation, as always, for growth primarily, as long as it comes at a good value, you know, maintaining our assets in like-new condition and then returning cash to shareholders. That's been our hallmark for the last decade and will continue to be our hallmark of how we deploy our capital.

Okay, thank you.

Our next question comes from Tyler Brown with Raymond James. Please go ahead.

Hey, good morning, guys. Hey, Craig, I think between Mountain Cement and Duke, you're going to spend maybe $760 million on those projects. And I know that those projects are kind of both growth and kind of maintenance in nature. But by the time we get to think about maybe fiscal 29, is there a return on that capital that we should think about conceptually? I mean, is there a way to think about, you know, we deploy $760 at some EBITDA multiple, or is there just any way to think about that off into the future?

Yeah, Tyler, great question. You know, look, I don't want to dismiss the, you know, when we make investments like those projects and we've made similar investments, we're getting a double-digit type of return on those investments. And so, yeah, as we get into fiscal 29, you know, that's when you've got both of those projects, you know, will have been completed and available, you know, and those cost savings, you know, will.

Okay, excellent. And then this is a bit more of a minutia question, I suppose, but you mentioned earlier that the paperboard plant is running very well, and it's no doubt if you look at the EBIT contribution of that plant. But big picture, is that $40 million of EBIT a good run rate, or was there a favorable setup this last year with revenue and cost mismatching or just any color there, just think about the longer-term model?

50% of their sales volume in deflators. So, yes, OCC was down, but, you know, that is about, you know, a team there, the high plant efficiencies, you know, that.

Perfect. Thanks, guys.

This concludes our question and answer session. I would like to turn the conference back over to Michael Hack for any closing remarks.

Thank you, Bailey. Before we end the call, I want to acknowledge and thank all of my Eagle colleagues for their focus and commitment through the turbulence of the last couple of years. The focus has enabled us to deliver strong financial results while making great progress on our two-plant modernizations in fiscal 2026. As we move into our fiscal year 2027, even as uncertainty persists, we'll keep steadily focused on safety, operational excellence, value-enhancing investment opportunities. Thanks for joining our call today. I look forward to keeping you updated on our progress through fiscal 2027.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.