Although this Mexican cement company’s earnings climbed by 41% in its latest quarter, the stock has taken a hit on weaker cash flow numbers. However, analysts expect EPS to continue moving up, as five analysts have increased their forecasts in the past 30 days.
Cemex (CX)
From Top Stocks Under $10
Buy a 5% position in Cemex (CX, Rated “C-”) at $9.95 or better, GTC
The pattern for Cemex (CX, Rated “C-”) stock suggests the stock has found investor support, has established a higher low, and is ready for an upside breakout.
And why not? Here are all the things CX has going for it:
Global Exposure: CX’s sales are picking up, and that trend is expected to continue because the post-recession global recovery is well entrenched. With recent encouraging economic data from Europe, expect growth around the globe to spread to other countries. That will help increase the length of our current expansion as well as our growth rate.
Infrastructure: It may be taking a while. But an infrastructure plan, whenever it does come, would help boost demand for CX’s concrete. In fact, the company announced it’s building a distribution terminal at a California quarry to help with the build out of the greater L.A. expansion. The company has been a leader in the state, with an established presence for more than 100 years.
Housing Construction: Housing demand has been rising steadily, and there’s still not enough new construction to meet it. So, home prices are going up and construction will follow suit. The US 20-City Shiller Home Price Index is up 5.5% year-over-year, and hasn’t seen a decline in more than five years.
Increased Earnings: Cemex is raising prices as demand increases. Just this year, it announced two price increases of 11% and 8% to protect against rising costs, as well as expand margins and profitability.
Deleveraging: CX is selling underperforming assets, raising free cash flow after multiple positive quarters, and paying down debt. CX has sold $2.4 billion in fixed assets, just shy of its target of $2.5 billion. And it has used those funds to pay down billions of dollars in debt.
That helps make the company more attractive to investors. It’s also less prone to currency fluctuations, and more exposed to the healthy U.S. market (its single largest geographic exposure, accounting for 26% of sales).
Don’t be surprised if the company gets a credit rating upgrade from S&P or Moody’s soon—something that would make it even more attractive to new investors. And on the analyst front, 82% of the company’s followers rate it at ‘Buy.’ Some have a price target as high as $12, though my own remains at $11.50.
Go ahead and take advantage of the recent pullback to get into CX now.
Mandeep Rai, Top Stocks Under $10, Weiss Research, Inc., www.moneyandmarkets.com/services/trading-services/top-stocks-under-10, issues@e.moneyandmarkets.com; 1-800-291-8545, August 1, 2017