CX - Cemex: Positive Drivers Undermined By Worries Around Mexico And Capital Allocation
2024-07-09 17:44:58 ET
Summary
- Cemex stock has underperformed peers, in large part due to bearish sentiment on Mexico after the recent presidential election.
- Demand and margins have stayed healthy in Mexico, and Q2 should see double-digit growth again, but guidance for the second half is a big watch item.
- U.S. results have been less impressive, with Cemex seeing headwinds from weather, weaker residential and non-residential demand, and higher transportation costs, but the longer-term supply/demand outlook is favorable.
- Capital management concerns persist as Cemex looks to grow U.S. business through M&A and brownfield expansion, while also balancing debt reduction and shareholder returns.
- Trading below $7 to $8, and with bullish long-term fundamentals for cement still in place, Cemex continues to look undervalued.
There are certain stocks where it just feels like there’s always some spanner in the works that limits the upside relative to what you otherwise think it should be. Cemex (CX) very much looks like one of those, as the company was supposed to be on the front end of a U.S. cement super-cycle driven by limited capacity and growth in infrastructure spending, healthy demand in Mexico, and a more responsible management where capital allocation is concerned....
Cemex: Positive Drivers Undermined By Worries Around Mexico And Capital Allocation