On Wednesday, Barclays shifted its rating on CEMEX (NYSE:CX) stock, a global building materials company, from Equalweight to Overweight, setting the price target at $9.00. This adjustment follows CEMEX's performance in the first half of the year, which Barclays found to be more positive than initially anticipated.
CEMEX demonstrated a 4% growth in EBITDA in the first half of the year, despite experiencing a slight decrease in cement volumes by 1%. The company also saw declines in other business segments, with aggregates dropping by 3% and ready-mix by 10%. Despite these challenges, Barclays anticipates an attractive entry point at the current valuation of CEMEX's stock.
Barclays' outlook is optimistic regarding the company's future performance. The firm expects some of the recent headwinds to be temporary and predicts at least some improvements in volume for the second half of the year. This projection is supported by CEMEX's solid pricing momentum and potential energy cost tailwinds.
The financial institution believes that these factors will contribute to CEMEX delivering a low to mid-single digit percentage increase in EBITDA. Barclays also notes there could be upside risks if energy costs remain favorable, which could further enhance the company's financial performance.
In other recent news, CEMEX, a global leader in the building materials industry, reported its second quarter results for 2024, exhibiting growth in EBITDA despite challenging weather conditions and flat net sales. The company's strategic pricing and investments, particularly in the US and its Urbanization Solutions business, have bolstered this growth.
CEMEX also achieved a second investment-grade rating from Fitch Ratings and announced a joint venture with Couch Aggregates to boost its aggregate reserves and distribution capabilities in the mid-South market of the US.
The company's EBITDA growth was driven by strategic pricing and investments, while its Urbanization Solutions business contributed to double-digit EBITDA growth. Despite volume declines in the US and EMEA regions due to weather and challenging demand environments, CEMEX remains optimistic about the medium-term outlook in Mexico, supported by the new federal government's agenda. The company expects improved volume performance in the US and Europe in the second half of the year.
CEO Maher Al-Haffar discussed energy cost dynamics, including a decrease in primary fuels costs and a drop in the clinker factor, expecting these trends to continue or improve.
CFO Fernando Gonzalez highlighted CEMEX Europe's success in reducing CO2 emissions ahead of schedule through various initiatives. The next earnings update is scheduled for the third-quarter webcast.
InvestingPro Insights
Barclays' recent upgrade of CEMEX (NYSE:CX) stock to Overweight with a price target of $9.00 comes at an interesting time for the company. According to InvestingPro data, CEMEX has a market capitalization of $9.09 billion and a high P/E ratio of 47.64, reflecting investors' expectations of future earnings growth. Notably, the adjusted P/E ratio for the last twelve months as of Q2 2024 stands at a more modest 16.78, suggesting a potentially more favorable valuation on an adjusted basis.
From a growth perspective, CEMEX has seen its revenue increase by 7.77% over the last twelve months as of Q2 2024, despite only a marginal quarterly revenue growth of 0.25% in Q2 2024. These figures align with Barclays' assessment of CEMEX's positive performance in the first half of the year and the potential for improvement in the latter half.
InvestingPro Tips highlight several key points that investors may find valuable. CEMEX is recognized as a prominent player in the Construction Materials industry and is expected to be profitable this year, having been profitable over the last twelve months. The company's aggressive share buyback strategy and high shareholder yield are also noted, adding to the attractiveness of the stock. However, it's worth mentioning that CEMEX does not pay a dividend to shareholders, which might be a consideration for income-focused investors.
For those seeking more in-depth analysis and additional tips on CEMEX, there are 9 more InvestingPro Tips available. By using the coupon code PRONEWS24, readers can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, offering further insights that could inform investment decisions in the context of Barclays' optimistic outlook for CEMEX.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.