Headquartered in San Pedro Garza García, Mexico, CEMEX, S.A.B. de C.V. (CX) manufactures and sells assorted construction materials to customers worldwide. With a market capitalization of almost $12 billion, CX is one of the leading players in the cement and construction industry. Shares of CX have gained 165.1% over the past year and 60% year-to-date.
Earlier this year, the company played a major role in addressing the cement shortage and supply chain disturbances in the Western states. CX invested $15 million to recommission a production facility in Mexico to meet surging demand for cement and other construction materials in California, Arizona, and Nevada. As a result, the company’s revenues increased 335% year-over-year to $3.86 billion in its fiscal second quarter ended June 30. Its earnings per ADS rose 2,353% from the prior-year quarter to $0.18.
This trend is likely to continue because CX is expected to benefit significantly from the $1 trillion infrastructure spending package to restructure U.S. infrastructure that is now working its way through the U.S. Senate.
So, here’s what we think could shape CX’s performance in the near term:
Sustainability Goals
CX has been taking steps to reduce its carbon footprint. On August 2, the company signed on to world-leading initiatives—Business Ambition for 1.5°C Commitment and The Race to Zero Campaign—to achieve carbon neutrality within the next few decades.
CX aims to reduce carbon dioxide emissions by at least 35% by 2030 and achieve carbon neutrality by 2050. CX partnered with BP in May to jointly accelerate progress toward CX’s 2050 target. To this end, CX launched its first-ever net-zero carbon concrete in Europe in October last year and plans to expand the supply to international markets.
In February, CX announced its participation in the Low Emissions Intensity Line and Cement 2 Project to decarbonize the cement production process.
Stable Growth Outlook
A $14.39 billion consensus revenue estimate for its fiscal year 2021 indicates a 10.9% improvement year-over-year. The company’s EPS is expected to rise 186.7% from the same period last year to $0.78 in the current year. Also, analysts expect CX’s EPS to grow 120.4% in the current quarter (ending September 2021) and at a 33.2% CAGR over the next five years.
Discounted Valuation
In terms of non-GAAP forward P/E, CX is currently trading at 12.97x, which is 13.9% lower than the 15.06x industry average. In addition, the stock’s 0.43 non-GAAP forward PEG ratio is 68.9% lower than the 1.39 industry average.
Furthermore, CX’s forward Price/Sales and Price/Cash Flow multiples of 0.84 and 4.73, respectively, compare favorably with industry 1.44 and 8.82 industry averages.
Consensus Rating and Price Target Reflect Potential Upside
Of the eight Wall Street analysts that rated the stock, six rated it Buy while two rated it Hold. The 12-month median price target of $10.76 indicates a 30.6% potential upside from yesterday’s $8.25 closing price. The price targets range from a low of $9.80 to a high of $12.00.
Favorable POWR Ratings
CX has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B grade for Value and Quality. CX’s relatively lower valuation compared to its peers justify the Value grade. In addition, CX’s 32.92% trailing-12-month gross profit margin is 10.9% higher than the 29.68% industry average, which is consistent with its Quality grade.
Of the 54 stocks in the B-rated Industrial - Building Materials industry, CX is ranked #7.
Beyond what we’ve stated above, we have rated CX for Momentum, Growth, Stability, and Sentiment. Get all CX ratings here.
View the top-rated stocks in the Industrial – Building Materials industry here.
Click here to check out our Industrial Sector Report for 2021
Bottom Line
CX’s robust international supply chain should allow the company to witness stable growth over the long run. Moreover, with strengthening market share in the United States and clearly defined sustainability goals, the stock is expected to gain significantly.
CX shares were trading at $8.19 per share on Wednesday afternoon, down $0.08 (-0.97%). Year-to-date, CX has gained 58.41%, versus a 18.52% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.
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