Construction materials company Cemex (CX) has enjoyed strong demand and high margins as it has successfully cemented growing profits by capitalizing on the wave of reshoring and nearshoring. Despite post-election bearish sentiment around Mexico, where the company is headquartered, it is strategically positioned across the Americas, the Caribbean, Europe, Africa, the Middle East, and Asia, with a global trading network of nearly 100 countries.
The stock is down 20% year-to-date, though the slide in price has pushed it into value territory, making it an attractive option for investors interested in emerging market and infrastructure stocks.
CEMEX Is More Than Cement
CEMEX, S.A.B. de C.V. is a global company that operates with its subsidiaries to produce, market, distribute, and sell a wide range of construction materials and services. These include cement, ready-mix concrete, aggregates, and urbanization solutions.
Apart from construction materials, the company provides industrial construction products like precast components, 2D panels, 3D modules, and complete structures. Its services extend to various areas such as logistics and transportation, retail, pavement services, and design and engineering. Furthermore, it also offers management services that manage multiple types of waste, such as municipal and industrial, construction, demolition and excavation, and alternative raw materials.
Analysis of CEMEX’s Recent Financial Results
The first quarter of 2024 saw consolidated net sales totaling $4.1 billion, marking a 3% increase from the same period in the previous year. Higher prices across all regions primarily drove this growth, although lower consolidated volumes mitigated it due to unfavorable weather conditions and fewer working days.
Net sales increased in Mexico and the South, Central America, and Caribbean region, while a decrease was seen in the US, Europe, the Middle East, Africa, and Asia. Cost of sales dropped to 66.4% from 68.0%, aided by product pricing and an easing of cost headwinds.
Operating EBITDA grew by 5%, reaching $772 million, thanks to strong product pricing and a successful growth investment strategy, among other factors. This resulted in a net income of $254 million, marking a robust 13% growth from the same quarter of 2023. Earnings per share (EPS) of $0.17 exceeded analysts’ expectations of $0.12.
The company announced a $120 million cash dividend in four installments. The first was paid to shareholders of record on June 18, 2024. The dividend from the company’s Net Tax Profit Account will be free from tax withholding.
What Is the Price Target for CX Stock?
The stock has been volatile over the past few years, though long-term investors have enjoyed a 68% gain over the past five years. Shares trade at the lower end of the 52-week price range of $5.65 – $9.23 and show negative price momentum, trading below the 20-day (6.52) and 50-day (6.87) moving averages. However, the slide in price shows that the stock is trading at a discount to industry peers, with a P/S ratio of 0.51x, which is favorable when comparing to the Building Materials average of 1.6x.
Analysts covering the company have been bullish on the stock. For example, Goldman Sachs analyst Jorel Guilloty recently assumed coverage of Cemex with a Buy rating and a $9 price target, noting the company should continue to benefit from momentum. Pricing power and declining costs could potentially drive 5% per year revenue growth in 2024-25 and EBITDA growth of about 8%.
Overall, Cemex is rated a Moderate Buy based on six analysts’ recommendations and price targets. The average price target for CX stock is $9.08, representing a potential upside of 47.64% from current levels.
Cemex in Summary
Cemex (CX), an industry-leading global manufacturer and distributor of construction materials, is an alluring prospect for investors in the infrastructure and emerging market sectors. Remarkable first-quarter results and a bullish outlook for further revenue growth point to a substantial upside for the stock, especially with shares trading at a discount compared to industry peers.
