Longbow: Time To Buy Cemex SAB

May 27, 2015

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In a report published Wednesday, Longbrow Research analysts upgraded the rating on Cemex SAB de CV < /b> (NYSE: CX) to Buy, while maintaining the price target at $12, on strong fundamentals in the Cement industry.

Cement industry’s fundamentals have continued to improve with price increases of 8-10 percent supported by volume growth in the range of 6-8 percent. “Utilization rates are climbing and contacts are concerned about available capacity late-2015 early-2016. These factors, including limited driver availability, suggest continued suppliers’ pricing power,” the analysts mentioned.

A recovery in the US cement market is expected to drive Cemex’s future growth prospects. “Despite a weak start to the year in US cement demand due to lower Texas volumes (we expect 4% volume growth for CX vs guidance of mid single digit growth) pricing remains a positive surprise.” The analysts added.

In the report Longbrow Research noted, “April/May domestic cement demand grew 6-8% y/y The Midwest, California and Southeast were incrementally stronger. Texas and Colorado both saw a strong April, although May brought weather related project delays.”

The company’s less exposure to Texas is a positive feature, the analysts noted adding, “We see 1) upside to US cement pricing, 2) Mexico recovering off a low base, and 3) Europe stabilizing. Essentially, CX is entering a period in which all of its main geographies are trending up.”