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 Haack. Mr. Haack, please go ahead.
Thank you, Bailey, and welcome everyone. Joining me today are Craig Kesler, our Chief Financial Officer, and Alex Haddock, Senior Vice President of Investor Relations, Strategy, and Corporate Development. There will be a slide presentation made in connection with this call. To access 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. Thanks for joining us today to discuss another year of solid 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 to our shareholders. Eagle has a long track record of consistently investing where it matters. Let me start with the safety of our people. For the past 5 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, Eagle will complete the modernization of 1 of our oldest cement plants, Mountain Cement, and 1 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. Another area of strategic investment has been in our quarries.
The limestone, gypsum, and rock that we have at each quarry and their proximity to their plants is crucial for Eagle Materials' 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 potential knock-on effects for short-term product demand. However, we are disciplined in 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. Our products are essential for building and renewal of America's infrastructure, schools, hospitals, and homes, to name some applications. Though demand for our core products is trending well below prior peak levels, the U.S. population has grown significantly, and the U.S. infrastructure of existing homes are reaching record age levels. At the same time, there are no scalable or viable substitutes for our products, and supply constraints across cement, wallboard, and aggregates will constrain 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. 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. In both our cement and aggregates businesses, where volumes are inflecting positively currently, in our wallboard business, where in the mid-term, we believe the volume is poised to rebound as the home building market normalizes, there is 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.
Our rigorous strategic and financial criteria mean we will be patient and ensure our inorganic and organic investments will reinforce consistent through the cycle growth. With that, I'll turn it over to Craig.
All right. Thank you, Michael. Fiscal year 2026 revenue was a record $2.3 billion, up 2% from the prior year. Fourth quarter revenue was also up 2% to a record $479 million. Both increases were driven by higher cement sales volume and contribution from the 2 acquired aggregates businesses, which were partially offset by lower wallboard sales volume and prices. Annual earnings per share was $13.16, down 4%. The decrease reflects lower net earnings, which were mostly the result of lower wallboard sales volume and prices, offset by a 5% reduction in fully diluted shares due to our share buyback program. Turning now to segment performance highlighted on the next slide.
In our heavy materials sector, which includes our cement and concrete and aggregates segments, revenue increased 10%, driven primarily by an 8% increase in cement sales volume and a 19% increase in concrete and aggregates revenue. Aggregates sales volume reached a record 6.6 million tons, up 70% year-over-year, reflecting contributions from our acquired aggregates operations. Importantly, organic aggregate sales volume increased 24%, underscoring healthy underlying demand. Sales volume growth in both business lines was supported by continued strength in public infrastructure spending, as well as key areas of private non-residential construction activity such as data center development. Operating earnings also increased 10%, driven primarily by higher cement sales volume, partially offset by a 1% decline in net cement sales prices. Moving to the light materials sector on the next slide.
Annual revenue in the sector decreased 9% to $881 million, reflecting lower wallboard and recycled paperboard sales volume, and a 4% decline in wallboard sales prices, resulting from continued softness in residential construction. Operating earnings in the sector were down 15% to $331 million, primarily because of lower wallboard sales volume and prices. Looking now at our cash flow. We continue to generate strong cash flow and allocate capital in a disciplined manner consistent with our long-term strategic priorities. During fiscal 2026, operating cash flow increased 12% to $614 million, reflecting the strength of our business and the resiliency of our operating model.
Capital expenditures totaled $417 million in fiscal 2026, driven primarily by investments in the modernization and expansion of our Mountain Cement plant in Laramie, Wyoming, and the modernization of our Duke Oklahoma wallboard facility. These projects represent important long-term investments that will enhance plant efficiency, improve reliability, and strengthen our competitive position. Looking ahead to fiscal 2027, we expect capital expenditures to range between $490 million-$525 million, reflecting continued progress on these strategic growth initiatives, as well as ongoing sustaining capital investments across the company. Capital spending is expected to peak in fiscal 2027, with the Mountain Cement project scheduled for commissioning later this calendar year and the Duke project anticipated to conclude in mid-fiscal 2028. At the same time, we remain committed to returning capital to shareholders.
During fiscal 2026, we returned a total of $414 million through quarterly dividends and the repurchase of approximately 1.7 million shares for $382 million. We ended the year with approximately 2.9 million shares remaining under our current repurchase authorization. Finally, turning to our capital structure, which continues to provide us with significant financial strength and flexibility. During the fiscal year, we further strengthened our balance sheet through the issuance of $750 million of 10-year senior notes at an attractive 5% interest rate. This transaction improved our debt maturity profile, enhanced committed liquidity, and better aligned our capital structure with the long-term strategic investments underway at our Mountain Cement plant and Duke wallboard facility.
We also used a portion of the proceeds to repay borrowings under our bank credit facility, further enhancing our financial flexibility. At March 31st, 2026, our net debt to capital ratio was 50%, and our net debt to EBITDA leverage ratio was 1.9 times. Levels we believe remain prudent and supportive of our growth strategy. We ended the quarter with $298 million of cash on hand and approximately $1 billion of total committed liquidity. Importantly, we have no significant near-term debt maturities, positioning us well to continue investing in the business while maintaining a strong and flexible balance sheet. Thank you for joining today's call. Bailey, we will now open the line for questions.
Our first question comes from Trey Grooms with Stephens. Please go ahead.
Good morning, Craig, Michael, and Alex, 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?
Yeah, no. Thanks, Trey. Look, on the cement side, as you saw, really good volume. Our regions continue to perform well. That volume, you know, the incremental on volume is good this quarter. As we saw, you know, a good flow through. We've, as Michael mentioned, a lot of our solid fuels have been obligated through supply agreements through this year. We continue to perform very well there. The plants, really good plant efficiencies, this quarter versus a year ago. You know, on the light side, the wallboard business continues to perform very well. The paper mill had another record year for us. That plant is running very well. Those plant efficiencies across the enterprise, really, you see the benefit and the margin profile that's being generated.
Yeah, very good. You know, on that cement volume strength in the quarter, 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?
We mentioned in the release, some portion of it was last year's fourth quarter had a really tough comp, or had a really tough weather environment. You know, there was a relatively easy comp. You know, as we've talked about, the underlying strength in public infrastructure remains positive with state budgets very healthy. The, you know, areas of private non-residential construction. We mentioned data centers. Those have been very strong, especially in the regions in which we operate. You know, those are the two big drivers for underlying demand. As you pointed out, really during, you know, what would generally be a pretty slow construction season.
We're excited about how the construction season has started, you know, here in April and carrying into May, you know, and shaping up for a good year in fiscal 2027.
Great. Thank you for that. Last one for me. On cement, you know, the pricing was down slightly, 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, 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 peak construction season? I know you did mention that regionally in some of your markets, you are seeing some tightening there. Just any color you might could give us on the cement pricing front.
We have cement price increases in just about every market for April first. Some of our Western markets and down South, we didn't have increases. You know, we're in the process of executing on those. We do have some higher freight costs that on a net basis will be impactful. We see that in cement when we transfer to terminals. We see that also in wallboard, as we pointed out in the release. We're in the process of implementing those and having a good volume environment is certainly a positive and a support for that.
Yep. All right. makes sense, thanks a lot for taking my questions. I'll pass it on, best of luck.
Our next question comes from Anthony Pettinari with Citi. Please go ahead.
Good morning. Just following up on Trey's question, and there's a little bit in the release about this. Could you maybe give any more color in terms of quantifying the impact of diesel and freight costs? Maybe just kinda 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. If you could put any kind of finer point on how a higher diesel environment impacts, you know, both the cement and the wallboard business.
Yeah. We'll start on the wallboard side. Maybe it's a little easier to understand. We price wallboard on a delivered basis, meaning, you know, we're responsible for the freight bill. You know, sequentially, we saw at least about a $2, maybe pushing $3, increase in freight costs. That impacts what we call our mill net, our net sales price. You know, that's how diesel from a delivery basis impacts the wallboard business. On cement, it's a little more nuanced, you know, 'cause there's a more of a combination of customer pickup and then, which, you know, the customers would cover versus the delivering to our terminals for them to pick up. We cover the freight to the terminal.
Again, we saw some inflation there, you know, $2 on a per ton basis. 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 plants, you know, close to the facility. We try to minimize what we can in terms of those freight costs. We certainly saw an impact, the delivery cost is a much more meaningful number for us today.
Okay. That's very helpful. Maybe just one follow-up. I know you don't have as much exposure to imports from a cement perspective as some other companies. You know, given the rise in fuel costs and challenges in ocean freight, are you seeing cement imports come in at a higher cost or meaningful impact there?
Yes. You know, we do import into a couple of markets, into South Texas and into Northern California. Yes, we've seen, you know, we track the Baltic Dry Index, and that has certainly ticked up here recently with all of the issues that are happening globally, not just the energy costs, but there's other factors that are impacting ocean freight rates. Yes, that has increased those costs, which, you know, again, is upward pressure on a supply and product into the U.S.
Okay, that's helpful. I'll turn it over.
Our next question comes from Timna Tanners with Wells Fargo. Please go ahead.
Yeah. 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?
It's definitely very meaningful. You know, we mentioned 2 things with public infrastructure. We continue to see good activity there in our markets. Data centers were certainly a large contributor to the improvement. I might add, I mean, it's not like we're in the last innings of the data center development. You know, we, you know, it's just in the beginning in many of our markets, more soil stabilization and those type of activities. That's certainly You know, it's funny. You think about the components of the demand environment, we talk about private non-res. We traditionally thought about hotels, office buildings, schools, those types of things. You really have components of private non-residential that didn't exist 10, 15 years ago, whether that's warehouses or these data centers.
You know, we've seen the fabrication facilities for a while now. You know, there's actual components of private non-res that I think are much more meaningful than what people were expecting and certainly than we've ever seen historically.
Our next question comes from Adam Thalhimer with Thompson Davis. Please go ahead.
Hey, good morning, guys. Nice quarter.
Thanks, Adam.
Craig, can you give a little bit more color on the April 1 cement price increases? On the wallboard side, what's the chance that wallboard pricing bottoms here in the near term?
Yeah. Adam, I'll start with the last part of your question first. We have a June 1st price increase in wallboard, and a lot of that is stemming from, you know, some of these transportation costs that we've seen over the last several months. That as I mentioned a few moments ago, you know, we price wallboard on a delivered basis, and that freight bill is falling back to us. We do have a price increase letter out there. You know, more broadly speaking, you know, Adam, you look at where the demand trends are for wallboard today in the United States, Michael mentioned it. You know, they are dramatically below trend that you would have expected to see with the population growth we've seen here in the U.S., et cetera.
You know, demand and pricing are going to be linked. Given where our business is performing at this demand level, you know, very, very proud of how that business is operating and, and our folks are running our facilities. In terms of the cement price increase, as we mentioned a little while ago also, we've got price increases in most markets for April first. You know, those are underway. There are some nets against with freight bills that'll offset that. You know, given the demand environment, we are pushing forward with those April first increases as well.
Okay. 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 2 big capital projects and you just had maintenance CapEx? Once the 2 big capital projects are done, what will the maintenance CapEx be in perpetuity?
Yeah, Adam, that's a great question. Something we really focus on. As I mentioned, fiscal 2027, this $500 million number will really be the peak. As you start to look towards fiscal 2028, as the Mountain Cement project will have been completed, the Duke plant will start, you know, 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. I don't think we're that exact run rate for fiscal 2028. We're probably still in the $250 million range with the Duke plant finishing in the first half of the year.
As you get into the back half of fiscal 28, absent some other significant project coming up, you know, we would be at that $150 million annual run rate.
Perfect. Thanks, Craig.
Our next question comes from Philip Ng with Jefferies. 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 the industry considerably. That trend reversed pretty nicely. Were there any one-offs that's driving that, like, with rebates and how contracts were set up, or are you seeing a nice catch-up here? Are you recapping some share at this point?
No, Philip, I don't think anything we would call out. I think as we talked about a year ago, we outperformed the industry because of some regional benefits and things like that. You know, this was just in the last couple of quarters were just a normalization of that. You know, 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. The crystal ball there isn't real clear. you know, it's clear over a broader time period, we need to build significantly more homes in the U.S. We're significantly underbuilt. you know, how that trend happens over the next six to nine months, I think is still a little unclear. Certainly over a broader time period, we see a lot of upside for that business, both for volume price and therefore margins.
Okay. On the cement side, certainly volumes are extremely strong in 2026. You know, admittedly, some of that's lapping easier comps. When we look out to April, May and frankly, 2027, you know, should we expect positive volume growth? You know, given 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. Just help us kinda tease out what you're seeing and how we should think about the demand backdrop this year.
Philip, it's interesting. We've seen the same data. Look, I think part of it is our regional footprint is certainly we saw it in calendar 2025 outperformed the national average. The national average was down in 2025, and we are up slightly. If you went market by market, region by region, however you wanna describe it, you know, our markets outperformed the national average. As we head into calendar 2026, our fiscal 2027, 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. Certainly understanding the ACA has a different number, you know, again, it could be more of a national average type of issue.
As we look at our markets, we continue to see good momentum there. Do I think we continue to post, you know, double-digit type of increases? I'm not suggesting that, but I do think we continue to see improvement in our markets.
Okay. 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 Eagle and the industry.
Yeah, you know, the last part of your question is pretty fresh. You know, some of that text coming out in the last, call it, 24 hours or so. I think what it points to is there's obviously a desire and a need to continue to extend the IIJA and its new version. I think that'll be supportive of public infrastructure for a long period of time. You know, it's a little early to speculate on exact dollar amounts and exactly how and when, but it's 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.
The projects that, you know, we've seen in the funnel, are already supported and don't see that impacting those projects moving forward.
Okay. Appreciate it. 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?
Appreciate the question on that. You know, we always look for M&A acquisitions, you know, as long as they make sense and meet our financial return criteria. You know, I think we've been clear and will remain clear on our capital allocation is 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 it 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.
Morning.
Hey, Craig. I think between Mountain Cement and Duke, you're gonna spend maybe $760 million on those projects, and I know that those projects are kinda both growth and kinda maintenance in nature. By the time we get to think about maybe fiscal 2029, 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 wanna go back to the projects. I mean, these are long-term strategic investments that, you know, will give us some incremental output, but also dramatically reduce the operating cost structure of both of those facilities. As we pointed out, you know, the Mountain Cement plant in Laramie, Wyoming is one of our oldest cement plants, will lower the cost structure predominantly through more energy savings, a much more fuel-efficient facility. Duke, same way, very similar. I don't wanna dismiss the improvements of those projects, but, you know, when we make investments like those projects, and we've made similar investments historically, you know, we're targeting a double-digit type of return on those investments.
Yeah, you're pointing out the right timeframe as we get into fiscal 2029. You know, that's when you've got both of those projects, you know, will have been completed and available to run. You know, and those cost savings, you know, will be very, very meaningful part of that improvement.
Okay. Excellent. That's helpful. This is a bit more of a minutiae 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. 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 mis-mismatching? Just any color there, just think about the longer-term model. Thank you.
You know, that profitability is sustainable. You know, part of that is because we have some pass-throughs, call it 60% of their sales volume is sold through long-term supply agreements, and those agreements have inflators and deflators. Yes, OCC was down this year, we have the ability, you know, if it goes up, you pass that along. Sometimes there's a quarter lag to that. You know, that is about, you know, a team there at the paper mill really performing well, high plant efficiencies. You know, that drove a lot of it, very sustainable earnings.
Perfect. Thanks, guys.
This concludes our question and answer session. I would like to turn the conference back over to Michael Haack 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 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, and high return 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.