Eagle Materials targets $475M-$500M in FY26 capital spending with major plant upgrades while launching cement price increases

Earnings Call Insights: Eagle Materials Inc. (EXP) Q2 2026

MANAGEMENT VIEW

* Michael Haack, CEO, opened by highlighting record revenue of $639 million, a gross margin of 31.3%, and earnings per share (EPS) of $4.23 for the quarter. He credited the results to the team’s operational performance despite “headwinds from the residential construction pullback.”
* Haack detailed strategic progress, including “significant progress on our Laramie, Wyoming plant modernization and expansion and commenced construction of our Duke, Oklahoma Wallboard plant upgrade.” He stated both projects are on budget and on schedule, directly aligned with the company's capital allocation principles.
* Haack noted the company’s strong safety record, stating, “Eagle Materials has a fantastic safety track record, consistently performing below the industry average for total recordable incident rates across all of our businesses.”
* On business outlook, Haack said, “We have announced price increases across most of our markets effective January 1, 2026.” He also observed that “Wallboard volumes this quarter are affected by reduced demand due to high interest rates and affordability challenges,” but emphasized the stability in wallboard pricing.
* Haack described major ongoing investments: “At our Laramie, Wyoming cement plant, we are on track to complete our $430 million modernization and expansion project by the end of calendar 2026,” which will lower manufacturing costs by 25%. The Duke, Oklahoma Wallboard plant modernization is expected to reduce unit production costs by about 20%.
* CFO D. Kesler reported, “Second quarter revenue was a record $639 million, up 2% from the prior year. The increase was driven by higher cement sales volume and the contribution from the recently acquired aggregates businesses.” He added, “Second quarter earnings per share was $4.23, down 1% from the second quarter of fiscal 2025.”

OUTLOOK

* The company maintains a reserved near-term view on residential construction due to ongoing high interest rates, impacting wallboard demand. Haack reiterated, “We do not obsess over near-term demand drivers. We run our businesses and invest in their long-term growth.”
* Announced cement price increases will take effect January 1, 2026, in most markets.
* Kesler stated, “Considering these 2 projects as well as our sustaining capital spending, we expect total company capital spending in fiscal '26 to be in the range of $475 million to $500 million.”
* On future capital plans, Kesler noted that spending is likely to step down to “$400 million to $425 million in that range for fiscal '27” with a further decrease in fiscal '28.

FINANCIAL RESULTS

* Record revenue for Q2 2026 reached $639 million, with gross margin at 31.3% and EPS of $4.23, as reported by both Haack and Kesler.
* In the Heavy Materials sector, revenue increased by 11%, with concrete and aggregates revenue up 24%, and record aggregate sales volume rising 103% (including acquisitions). Organic aggregate sales volume rose 35%.
* Light Materials sector revenue decreased by 13% to $213 million, reflecting lower wallboard sales volume and a 2% decrease in wallboard sales prices. Operating earnings in this sector were down 20% to $78 million.
* Operating cash flow for the quarter was $205 million, down 12% due to working capital and tax timing. Capital spending increased to $109 million, mainly for the Mountain Cement and Duke Wallboard projects.
* $97 million was returned to shareholders in the quarter through share repurchases and dividends.
* Net debt-to-cap ratio at September 30, 2025, was 45%, with net debt-to-EBITDA leverage at 1.6x and $35 million in cash on hand.

Q&A

* Trey Grooms, Stephens: Asked about the 14% decline in wallboard volume and drivers for quarter-to-quarter swings. Kesler responded, “We saw the production from the builders pullback during the July, August time frame… quarter-to-quarter shifts happen that can be more noise than anything.”
* Grooms: Inquired about wallboard pricing stability. Kesler said, “We’re more oriented to price than we are volume... we've taken the approach of value over volume.”
* Grooms: On cement volume outlook, Kesler explained, “Infrastructure spending and private nonres... have continued to be strong demand drivers. We saw that here in the last quarter... volumes have continued to trend positive.”
* Andrew Maser, Stifel: Asked about organic aggregates growth. Haack highlighted, “35% growth on our existing operations was also in there from some of the capital improvements we made.”
* Maser: On margin outlook for aggregates, Kesler said, “This is a much more normal run rate... very happy with how that business has performed coming into this year.”
* Brent Thielman, D.A. Davidson: Asked about cement pricing and oil well impact. Kesler clarified, “Oil well cement has become a much smaller percentage of our business... pricing within the wholly owned business... is actually pretty stable.”
* Anthony Pettinari, Citigroup: Asked about CapEx and cash tax impact from new projects. Kesler stated, “Capital spending for fiscal '26... still expect to be $475 million to $500 million... the Mountain Cement plant goes in service in fiscal '27, which would significantly reduce cash taxes paid in fiscal '27.”
* Unknown Analyst: Queried on underlying cement demand. Kesler said, “Cement demand typically grows in the 2% to 4% range... jobs don’t get eliminated, they just get delayed.”
* Jonathan Bettenhausen, Truist: Asked if price increases applied to wallboard. Kesler replied, “Just in cement.”

SENTIMENT ANALYSIS

* Analysts pressed on declining wallboard volumes, pricing resilience, cement demand sustainability, and margin trends, reflecting a slightly negative to neutral sentiment regarding near-term demand, but acknowledged the company’s operational strengths.
* Management maintained a confident and long-term oriented tone in prepared remarks, but was more reserved and cautious when addressing short-term demand and volume questions during Q&A. Haack and Kesler both used language emphasizing discipline and optimism for long-term growth.
* Compared to the previous quarter, the tone shifted slightly toward caution on residential construction, while maintaining strong confidence in heavy materials and strategic investments.

QUARTER-OVER-QUARTER COMPARISON

* Q2 saw a decrease in EPS and light materials revenue compared to Q1, with a sharper focus on headwinds in residential construction. Wallboard volume and sales prices declined more noticeably, while cement and aggregates growth accelerated with strong volume and revenue increases.
* Guidance language shifted to emphasize capital allocation for modernization and expansion, with detailed timelines and spending projections for fiscal '26 through '28.
* Analysts moved from requesting broad outlooks to probing specific drivers behind segment swings and cost/control outlooks.
* Management’s confidence in long-term strategy and capital discipline remained consistent, but with added caution regarding short-term demand fluctuations, especially in the wallboard segment.

RISKS AND CONCERNS

* Management identified high interest rates and housing affordability as primary risks impacting wallboard demand.
* Analysts raised concerns about the volatility in wallboard volumes, pricing stability, and competitive pressures in cement, with management reiterating their focus on value over volume and price leadership.
* No significant new risks were raised regarding the company’s financial structure or ability to fund capital projects.

FINAL TAKEAWAY

Eagle Materials delivered record second quarter revenue and gross margin amid mixed demand conditions, led by strength in cement and aggregates and offset by weakness in wallboard. Management emphasized disciplined capital allocation, price increases for cement, and major modernization projects, while remaining cautious about near-term residential construction headwinds. The company reiterated its commitment to long-term growth, shareholder returns, and operational excellence as it navigates market challenges and invests in high-return projects.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/exp/earnings/transcripts]

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