Judah Aronovitz

Judah Aronovitz inquired about the confidence level in achieving 5% pricing for 2026, whether it's based on pricing already in place or if more work is needed, and if there are any mixed headwinds from base products or other factors.

Answer

Chair, President and CEO Ward Nye confirmed that the 5% pricing for 2026 is largely based on conversations already held with customers. He acknowledged potential optical headwinds from M&A, where acquired businesses might have lower average selling prices, and from geographic or product mix shifts (e.g., increased demand for lower-ASP base stone for large data centers). Ward Nye emphasized the importance of carefully communicating these mix issues quarterly to provide an accurate view of business performance.

Judah Aronovitz asked about Martin Marietta's biggest uncertainties for 2026 compared to the previous year, the company's confidence in sustained growth and gross profit per ton for aggregates, and whether double-digit growth is a reasonable expectation.

Answer

Chairman and CEO Ward Nye expressed greater confidence for 2026 than 2025, citing continued IIJA pull-through, attractive state DOT budgets, constructive heavy non-residential growth (especially data centers and emerging energy plays), and an anticipated recovery in the muted residential market in H2 2026. SVP and CFO Michael Petro advised modeling gross profit per ton based on the 250 basis point price-cost spread discussed at Capital Markets Day.

Judah Aronovitz inquired about the biggest uncertainties for 2026 compared to the previous year, the company's confidence in sustained growth and gross profit per ton on aggregates, and whether double-digit growth is a reasonable expectation.

Answer

Ward Nye, Chairman and CEO, expressed greater confidence in 2026 compared to 2025, citing continued IIJA pull-through, attractive state DOT budgets, constructive heavy non-residential activity (data centers, energy), and an anticipated H2 housing recovery. Michael Petro, SVP and CFO, advised modeling gross profit per ton based on the 250 basis point price-cost spread rather than expecting double-digit growth.

Judah Aronovitz of UBS Group asked if PA Consulting's backlog supports continued double-digit growth and what factors are influencing its margins. He also questioned the implied Q4 deceleration in the net service revenue (NSR) growth guidance.

Answer

Chair & CEO Bob Pragada guided to strong high single-digit growth for PA Consulting, noting improved utilization is driving margins with further opportunity from efficiency gains. CFO Venk Nathamuni clarified that the Q4 guidance does not imply a deceleration, expecting performance similar to Q3's strong results.

Judah Aronovitz, on for Stephen Fisher, followed up on previous commentary about a second-half reacceleration in international infrastructure, asking what provides confidence in that outlook.

Answer

Chair and CEO Bob Pragada explained that confidence stems from consistent growth in the global water market and increasing activity in 'cities and places' work, including large-scale programs in the Middle East, the U.K., Australia, and Southeast Asia. He characterized the outlook as being supported by a diversified blend of end markets.

Judah Aronovitz from UBS questioned the feasibility of Fluor's long-term 10-15% EBITDA CAGR target following the 2025 guidance reduction. He also asked if recent pro-growth legislation was already impacting customer conversations and sought clarification on the cash flow impact of the LNG Canada change order.

Answer

CEO Jim Breuer defended the long-term strategy, stating that while there is short-term hesitation, the target markets remain poised for growth over the four-year planning cycle. He noted that while it's still early, the new legislation provides tailwinds for domestic markets where Fluor is already active. CFO John Regan clarified that for the LNG Canada settlement, cash flow to Fluor occurs when the joint venture receives the funds and subsequently makes dividend distributions, which is an important two-step process.

Judah Aronovitz, on for Steve Fisher, asked which programs were associated with the cumulative catch-up adjustment in the Defense segment and about the risk of future adjustments.

Answer

CFO Matthew Field clarified that the adjustment was primarily related to the JLTV and FMTV programs due to production line rebalancing. He stated that based on current information, he does not expect material cumulative catch-up adjustments going forward, as future projections are already factored into the accounting.

Judah Aronovitz asked about the factors that could drive organic growth toward the upper end of the company's 5-8% long-term range and what conditions might lead to increased M&A activity given the company's low leverage.

Answer

CEO Troy Rudd suggested that increased global political stability would create a better marketplace and could improve growth prospects. Regarding capital allocation, Rudd reiterated a returns-based approach, prioritizing high-return organic investments. He stated that M&A would be considered primarily as a tool to accelerate organic strategies, such as building the advisory business, rather than for large, scale-based acquisitions.

Judah Aronovitz asked for clarification on the source of the gain on sales recorded in the quarter and inquired about the amount of storm-related work embedded in the company's Q4 guidance.

Answer

CFO Ken Dodgen explained that the gain on sale was related to some equipment and, specifically, the sale of a facility in the Dallas-Fort Worth area that was no longer needed. He also stated that only a couple of million dollars of storm work is included in the Q4 outlook, as the recovery from the latest storm was quicker than anticipated.