Aggregates

# Executive Summary * The aggregates industry is experiencing a multi-year, publicly funded infrastructure boom, driven by the Infrastructure Investment and Jobs Act (IIJA) and robust state budgets, providing strong and predictable demand. * This public sector strength is partially offset by macroeconomic headwinds, as persistently high interest rates dampen private construction, particularly in the residential sector. * Margin expansion and competitive advantage are increasingly driven by strategic investments in technology and operational efficiency programs designed to lower production costs and enhance pricing power. * The competitive landscape is being actively reshaped by strategic mergers and acquisitions (M&A), as industry leaders focus on acquiring core aggregates assets and expanding in high-growth regions. * A structural shift towards decarbonization is underway, creating long-term opportunities for companies investing in sustainable materials and low-carbon technologies to differentiate their offerings. * Financial performance across the industry is bifurcated, with strong revenue growth in infrastructure-exposed segments contrasting with weakness in residential-facing product lines. * Balance sheets across the industry remain healthy, characterized by manageable leverage and strong liquidity, supporting strategic investments in M&A and modernization projects. ## Key Trends & Outlook The aggregates industry is experiencing a period of robust, durable demand, primarily fueled by historic levels of public infrastructure investment. The Infrastructure Investment and Jobs Act (IIJA) remains a critical tailwind, with approximately 50-60% of its funds still to be deployed as of late 2025. This federal spending is amplified by record fiscal year 2026 budgets in key states like Texas, Florida, and North Carolina, creating a predictable pipeline of projects. This translates directly into higher volumes and record backlogs for contractors and materials producers, providing significant revenue visibility; for example, Granite Construction's (GVA) backlog of committed and awarded projects (CAP) hit a record $6.3 billion in Q3 2025. However, this public strength is juxtaposed against near-term softness in private construction, where high interest rates have notably weakened the residential market, as evidenced by Eagle Materials' (EXP) 14% year-over-year decline in wallboard volumes in Q2 FY26. In response to persistent input cost inflation, leading operators are aggressively deploying technology to protect and expand margins. This involves significant capital investment in plant modernization to reduce energy consumption and enhance automation. Furthermore, companies are leveraging process intelligence systems and dynamic pricing software to optimize production and pricing in real-time, creating a sustainable cost advantage. Vulcan Materials' (VMC) "Vulcan Way of Operating" (VWO) has contributed to a 2% year-over-year decrease in aggregates freight-adjusted unit cash cost of sales in Q3 2025, while Eagle Materials (EXP) is investing $430 million to modernize its Laramie cement plant, projecting a 25% cost reduction. The accelerating demand for sustainable building materials presents a significant opportunity for innovators to differentiate their products and potentially command premium pricing, especially as regulations like the Carbon Border Adjustment Mechanism (CBAM) take effect in Europe from 2026. The primary risk remains macroeconomic volatility; a sharper-than-expected downturn in private non-residential construction could challenge the industry's growth trajectory, even with the public infrastructure backstop. ## Competitive Landscape The U.S. aggregates market is a consolidated industry characterized by high barriers to entry, where scale and vertical integration are key competitive advantages. Vulcan Materials (VMC) stands as the nation's largest construction aggregates producer, underscoring the concentrated nature of the market. The capital intensity required for quarry development and stringent permitting processes for new sites further reinforce these barriers. Within this structure, distinct strategic approaches emerge. Scale-driven, aggregates-led leaders, exemplified by **Vulcan Materials (VMC)**, leverage their massive footprint as top national producers to achieve cost efficiencies. Their core strategy focuses on the high-margin aggregates business, complemented by selective vertical integration into downstream products like asphalt and ready-mix concrete in key markets to control supply chains and capture additional value. VMC's recent divestiture of downstream assets in Texas and California, while acquiring aggregates-rich companies like Wake Stone, clearly illustrates this aggregates-led model. Another prominent strategy is that of acquisition-fueled regional consolidators, best demonstrated by **Construction Partners (ROAD)**. These companies achieve rapid growth by acquiring smaller, local producers in high-growth geographic regions, particularly the Sunbelt. They employ a vertically integrated model to control the entire value chain for roadway projects, from aggregates and asphalt production to paving services. Construction Partners' 51% year-over-year revenue growth in Q3 FY25 is a direct result of its "family of companies" acquisition strategy, as shown by its recent purchases of Lone Star Paving in Texas and Overland Corporation in Oklahoma to bolster its Sunbelt presence. Finally, specialized niche dominators, such as **United States Lime & Minerals (USLM)**, focus on a specific segment of the market, like lime and limestone products, rather than broadly competing in construction aggregates. This strategy allows them to serve a diverse set of end markets, including industrial, environmental, and construction, which can reduce cyclicality. USLM's focus enables it to achieve industry-leading gross margins of 51.2% in Q3 2025 and serve diverse customers from data centers to steel manufacturing. Active mergers and acquisitions remain the primary dynamic reshaping this landscape, as companies across all models seek to strengthen their core positions, enhance vertical integration, and expand into attractive geographic markets. ## Financial Performance Revenue growth across the industry is bifurcating, driven primarily by end-market exposure and strategic initiatives. The range of year-over-year revenue growth in the provided data spans from a robust +51% to a decline of -12.1%. This wide divergence is a direct result of the material trends impacting the industry. Growth is strongest for companies executing aggressive M&A strategies and those with heavy exposure to public infrastructure spending. Construction Partners (ROAD) exemplifies this, reporting a substantial +51% year-over-year revenue growth in Q3 FY25, largely fueled by its acquisition-driven expansion. In contrast, companies exposed to residential construction weakness or severe regional macroeconomic instability are seeing flat to negative growth. Eagle Materials (EXP) perfectly illustrates this split, with its overall modest +2% year-over-year revenue growth in Q2 FY26 masking a significant underlying divergence: its infrastructure-facing heavy materials segment grew +11% year-over-year, while its residential-facing light materials segment declined -13% year-over-year. {{chart_0}} Profitability across the industry is expanding for disciplined operators, though it remains under pressure from persistent input cost inflation. Gross margins range from approximately 17% for vertically integrated contractors to over 50% for specialized producers. The key driver of margin expansion is the successful implementation of technology and operational efficiency programs, combined with strong pricing power derived from robust infrastructure demand. Companies that can effectively offset inflation with price increases and cost reductions are succeeding in expanding their margins. The highest margins are found in specialized, non-commoditized niches with high barriers to entry. United States Lime & Minerals (USLM) stands out as a profitability leader, reporting an exceptional 51.2% gross margin in Q3 2025, demonstrating the power of a specialized niche model. Vulcan Materials (VMC) provides a strong example for the broader industry, expanding its cash gross profit per ton through its "Vulcan Way of Operating" (VWO) efficiency program and disciplined pricing. {{chart_1}} Capital allocation strategies across the industry demonstrate a clear strategic focus on investing in core assets, supplemented by shareholder returns. Companies are allocating capital with discipline, prioritizing strategic M&A in core aggregates and investments in high-return modernization projects. After funding growth, excess cash is returned to shareholders via buybacks and dividends, signaling confidence in the business outlook. Martin Marietta (MLM) provides the quintessential example of this balanced approach, having divested its South Texas cement business for $2.1 billion in early 2024 and immediately redeploying that capital into targeted aggregates acquisitions, while also repurchasing $450 million in stock in Q1 2025. Balance sheets across the industry are overwhelmingly strong and healthy. Leverage is generally low and manageable, with some companies operating debt-free. Strong cash flow generation from robust demand and pricing power has allowed most companies to maintain healthy balance sheets. This financial strength provides the flexibility to fund acquisitions, invest in capital projects, and weather economic uncertainty without undue stress. United States Lime & Minerals (USLM), with $349.5 million in cash and no outstanding debt as of Q3 2025, represents the gold standard and highlights the financial fortitude possible within the industry. {{chart_2}}