Cemex raised to Buy at Longbow

Cemex raised to Buy at Longbow
28 May 2015

Cemex is upgraded to Buy from Neutral by Longbow, based on continually improving fundamentals in the cement industry with price increases of 8-10 per cent supported by volume growth of 6-8 per cent.

In a report published Wednesday, Longbrow Research analyst said utilisation rates are climbing and contacts are concerned about available capacity in late 2015 and early 2016; these factors, including limited driver availability, suggest continued suppliers' pricing power.

US driver
A recovery in the US cement market is expected to drive Cemex's future growth prospects. "Despite a weak start to the year in US cement demand due to lower Texas volumes (we expect four per cent volume growth for CX versus guidance of mid-single digit growth) pricing remains a positive surprise." the analysts added.

The report highlighted that in April/May domestic cement demand grew 6-8 per cent YoY and the Midwest, California and Southeast were incrementally stronger. Texas and Colorado both saw a strong April, although May brought weather related project delays.

The company's less exposure to Texas is a positive feature, the analysts noted adding: "We see 1) upside to US cement pricing, 2) Mexico recovering off a low base, and 3) Europe stabilizing. Essentially, CX is entering a period in which all of its main geographies are trending up."

Main geographical areas trending higher
The research house further added that Cemex is entering a period in which all of its main geographic areas are trending higher, the firm says, citing upside to US cement pricing, Mexico recovering from a low base and Europe stabilising.

Published under Cement News

Tagged Under: Mexico USA Pricing Cemex