Cemex (CX) Gains After Analysts Raise Price Target

NEW YORK (TheStreet) -- Cemex (CX) gained 0.6% to $12.93, raising as high as $13.15 Wednesday after Morgan Stanley raised the price target for the cement producer.

Analysts Nikolaj Lippmann and Lillian Starke raised the price target of Cemex to $14 from $13 and reiterated its "overweight" rating. The analysts wrote that "consolidation in Mexico's cement industry came into focus after the Cemex-Holcim asset swap last year." They noted that more consolidation could "be a game-changer with regard to long-term profitability of the market."

Lippmann and Starke note that "supply looks more disciplined" even without more consolidation. "Several plants could be delayed. This could create a window for CX from 2015-17. Consolidation would extend this," they wrote.

Cemex rallied even before the analysts' note, gaining 19% over the past three months.

TheStreet Ratings team rates CEMEX SAB DE CV as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate CEMEX SAB DE CV (CX) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, growth in earnings per share and increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • CEMEX SAB DE CV has improved earnings per share by 32.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, CEMEX SAB DE CV continued to lose money by earning -$0.79 versus -$1.23 in the prior year. This year, the market expects an improvement in earnings (-$0.41 versus -$0.79).
  • CX, with its decline in revenue, slightly underperformed the industry average of 8.5%. Since the same quarter one year prior, revenues slightly dropped by 8.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for CEMEX SAB DE CV is currently lower than what is desirable, coming in at 34.27%. Regardless of CX's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -3.82% trails the industry average.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Construction Materials industry and the overall market, CEMEX SAB DE CV's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: CX Ratings Report

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