Research Materials: Eagle Materials Long

The following are copies of materials for my research on Eagle Materials:

Eagle Materials Memo.pdf

Download PDF • 190KB

Eagle Materials Model.xlsx

Download XLSX • 1.58MB

We believe Eagle Materials owns incredible cement assets in good geographies across the U.S. As they continue their transition toward the cement and concrete businesses, they will be rewarded with a higher multiple. You can buy Eagle cheap right now because residential construction is weak and weighing down the light materials segment. I don't know when housing will inflect, which poses a risk to our ownership. This may force us to be more patient than we'd like to be.

They are entering a capex cycle and there are concerns of pressure on margins in the light materials segment. I think the concern over the capex cycle is impatience and management has shown an ability to allocate capital incredibly over the course of Eagle's history. I'm personally more concerned about a recession, as the chart now looks awfully similar to the chart in 2006. This feels like the only scenario where we lose our shirt from here.

I'm starting Eagle at an 8% weight. It's not my favorite idea, but it aligns with the core tenants of my investment philosophy.