Eagle Materials Inc. (EXP) Cash Flow Statement

The wide quarterly swings in OCF/NI, from 0.82 to 1.70, suggest that working capital changes and non-cash items like D&A create significant noise in reported earnings. The 2026Q1 ratio of 1.51 indicates that cash conversion remains strong, but the variability implies that investors should not rely on a single quarter's earnings quality. The gap between net income and operating cash flow appears driven by working capital swings, particularly in 2025Q4 where OCF/NI was 1.70 despite a negative working capital change of only -$296K, suggesting other timing effects.

The FCF margin trajectory shows a clear downward trend, with the most recent quarter at 5.2% versus a peak of 26.7% in 2024Q2. This compression is driven by a significant increase in capital expenditures, which rose from $66.5M in 2024Q2 to $120.8M in 2026Q1, while revenue growth remained modest. The elevated capex suggests management is investing in growth or maintenance, but the resulting FCF decline may limit flexibility for shareholder returns if the trend persists.

The capex-to-revenue ratio has more than tripled over the past two years, indicating a significant step-up in investment. While this could be maintenance-related, the magnitude suggests growth-oriented spending, possibly in cement or wallboard capacity. The increase in capex has directly pressured FCF, and investors should monitor whether this investment yields higher revenue and margins in future periods. The elevated capital intensity relative to peers like MLM and VMC, which have lower capex ratios, may indicate a strategic divergence.

The working capital changes show no clear trend, with large negative and positive swings across quarters. For instance, 2025Q4 saw a negligible change of -$296K, while 2024Q2 had a positive $51.9M, suggesting that the company's cash conversion cycle is subject to timing effects. This volatility complicates the interpretation of quarterly OCF and may indicate that the company is managing payables or inventory in response to demand fluctuations. Investors should focus on annual trends rather than quarterly noise.

Over the past ten quarters, buybacks have consistently exceeded dividends, with the largest repurchase of $142.6M in 2025Q3. This suggests management views the stock as undervalued and prioritizes returning cash to shareholders. However, the simultaneous increase in capex and buybacks may strain FCF, especially if operating cash flow does not grow. The low debt-to-equity ratio of 1.22% provides ample balance sheet capacity, but the sustainability of this dual strategy depends on maintaining strong OCF.

The cumulative OCF/NI ratio of approximately 1.29 suggests that the company's earnings quality is high, with non-cash charges like D&A and favorable working capital movements boosting cash flow. This divergence may indicate that the company is understating its true cash-generative capacity, possibly due to conservative accounting or timing. However, the recent increase in capex could narrow this gap in the future, as more cash is reinvested into the business.