Cemex, whose shares have been hurt by a sagging U.S. market, could be poised for a rebound due to expected sales growth and cost savings, according to a report in the latest issue of Barron’s.
Shares of the company have lost one-third of their value since last June on concern about an acquisition that broadened its exposure to the anemic U.S. market.
"That presents a compelling investment opportunity in a solid, century-old company," Barron’s said. It said Mexico, Cemex’s second-biggest market, plans to spend $7.5bn on roads and other public works in 2008 that could bolster company sales.
Moreover, Cemex now expects to realize US$400m in cost savings from its acquisition last July of Rinker Group, including savings this year alone of US$200m, Barron’s said.
The share price of Cemex, at about eight times its estimated 2009 per-share earnings, fully reflects the risk of a deep recession in the United States, the article said.
"Trading at a more normal 12-14 times earnings would put the share price between $38 and $44, a gain of 50 percent to 75 percent from current levels," Barron’s said.