Cemex cut to underperform by Credit Suisse

Cemex cut to underperform by Credit Suisse
Published: 12 July 2011

Credit Suisse cut its rating on shares of Cemex to underperform from outperform Monday, pointing to a gloomy outlook for jobs, housing and public works in the U.S.

The investment bank also sliced its target price for Cemex American Depositary receipts to US$6.50 from US$12. Cemex ADRs recently traded down 4.6% to $7.98 in New York.

The analysts said they anticipate that the US federal government will spend 20% less than expected on public works in 2012 and in subsequent years, adding that public works spending accounts for 63% of Cemex’s total US cement demand.

Furthermore, Cemex is highly exposed to depressed housing markets in states such as Florida and California, Credit Suisse noted.

Credit Suisse forecasts that the company will report EBITDA of US$624m for the second quarter, which the investment bank said is at least 6% below the market consensus.

The bank also warns that it sees Cemex breaching debt covenants by 2013, creating a long-term overhang on its shares.