Why Cemex (CX) Was Up Today

NEW YORK (TheStreet) -- Cemex  (CX) closed up 3.6% to $12.90 on Friday following Longbow Research's upgrade of the Mexican cement producer. Longbow upgraded Cemex to a "buy" rating from "neutral". This rating comes on the heels of news that the construction industry recovery that blossomed in 2013 will continue to pick up the pace in 2014.

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The rating increase helped propel Cemex closer to its 52 week high of $13.51.

There are also brightening prospects for the industry as a whole. A survey conducted by Engineering News-Record revealed this, "The ENR Construction Industry Confidence Index (CICI) for the first quarter of 2014 shows a dramatic leap in expectations about the current and near term by construction and design firm executives," said Janice L. Tuchman, editor-in-chief of Engineering News-Record. "Survey respondents believe the private-sector markets are the healthiest, led by petroleum, power, hotels & hospitality, and multi-unit residential. All sectors measured by the survey were on the upswing."

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 growth in earnings per share, increase in net income and revenue growth. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."

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

  • CEMEX SAB DE CV has improved earnings per share by 46.8% 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 year. 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 -$0.69 versus -$0.79 in the prior year. This year, the market expects an improvement in earnings (-$0.08 versus -$0.69).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Construction Materials industry. The net income increased by 47.0% when compared to the same quarter one year prior, rising from -$485.47 million to -$257.16 million.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength 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.
  • The gross profit margin for CEMEX SAB DE CV is currently lower than what is desirable, coming in at 32.16%. Regardless of CX's low profit margin, it has managed to increase from the same period last year.
  • You can view the full analysis from the report here: CX Ratings Report
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