Why Texas Industries (TXI) Is Up Today

NEW YORK (TheStreet) -- Texas Industries  (TXI) rose 8.56% to $74.57, up $5.88 from its previous close of $68.69, at the close of the trading day on Friday after a report that Martin Marietta Materials  (MLM) is in talks to acquire the company.

Bloomberg reported that Martin Marietta, the second-largest producer of sand, gravel and crushed rock for construction in the U.S., is in "advanced talks" to purchase Texas Industries, a building materials company. The site reports that a deal could be announced as early as next week. Bloomberg notes a report from last month that Texas Industries, which has a market value of $2 billion, is working with Citigroup  (C) to find a buyer.

The talks between Texas Industries and Martin Marietta restarted this week after they hit a rough patch, though it is still possible that the two sides might not reach an agreement. If they do, it could be an all-stock transaction.

On Friday, Martin Mareitta closed at $104.26, down 4.5% or $4.91 from its previous close of $109.17. 

TheStreet Ratings team rates Texas Industries as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate TEXAS INDUSTRIES INC (TXI) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in stock price during the past year and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, disappointing return on equity and deteriorating net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 8.5%. Since the same quarter one year prior, revenues rose by 24.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Construction Materials industry and the overall market, TEXAS INDUSTRIES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • TEXAS INDUSTRIES INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, TEXAS INDUSTRIES INC swung to a loss, reporting -$0.39 versus $0.06 in the prior year. For the next year, the market is expecting a contraction of 59.0% in earnings (-$0.62 versus -$0.39).
  • You can view the full analysis from the report here: TXI Ratings Report

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