Despite supply shortages and rising transportation costs caused by the Russian-Ukrainian war, increased demand with the reopening of the global economy is expected to drive growth in the building materials industry. We therefore think it might be a good idea to bet on oversold CRH (CRH) and CEMEX (CX) building materials stocks, which are well positioned to take advantage of high prices. Continue reading.
Although companies that produce construction materials are affected by the Russian invasion of Ukraine and its impact on the supply shortages due to soaring energy costs, the housing market remains in the grip of growing demand in an environment of low mortgage rates. In addition, President Biden’s infrastructure spending is expected to further boost demand for building materials.
The outlook for the industry looks promising worldwide. With the vaccination campaign gradually containing the spread of the COVID-19 virus, business is expected to increase in the infrastructure and residential segments. According to Research and Markets, the global building materials market is expected to grow at a pace CAGR of 5.57% through 2026.
CRH SA (HRC)
Based in Dublin, Ireland, CRH manufactures and distributes building materials through its subsidiaries. It operates in three segments: Materials Americas; European materials; and building products. The company manufactures and supplies cement, lime, aggregates, precast concrete, ready-mixed concrete and asphalt products.
On February 28, 2022, CRH announced that it had agreed to divest its Building Envelope business to KPS Capital Partners, LP, for an enterprise value of $3.80 billion. The decision to divest at an attractive valuation follows a comprehensive review of the business and demonstrates its active approach to portfolio management, efficient capital allocation and the creation of a leaner, more focused group.
CRH’s sales increased 12% year-over-year to $31 billion for its fiscal year ended December 31, 2021. The company’s EBITDA increased 16% year-over-year another to reach $5.35 billion, while its operating cash flow was $4.20 billion, representing a 7% year-over-year increase. Additionally, its EPS was $3.29, up 35% year-over-year.
The stock is down 8.9% over the past month to close yesterday’s trading session at $45.05.
HRC POWR Rankings reflect this promising prospect. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. POWR ratings rate stocks on 118 separate factors, each with its own weighting. The stock has a B rating for growth, value, stability and quality.
CEMEX, CV SAB (CX)
Based in San Pedro Garza Garcia, Mexico, CX produces, markets, distributes, sells cement, ready-mix concrete, aggregates and clinker worldwide. The company offers various complementary construction products, including asphalt products, concrete blocks, tiles and concrete pipes.
On March 7, 2022, CX announced that following the successful restart of a kiln at its CPN cement plant located in northwestern Mexico in 2021, it was reactivating the second CPN kiln. This investment is expected to leverage CEMEX’s unrivaled regional sales network to meet growing cement demand in the western United States.
CX’s revenue increased 3% year-over-year to $3.62 billion for its fiscal fourth quarter, ended December 31, 2021. The company’s operating EBITDA increased by 3% year-on-year to $651 million, while its net profit was $204.25. million, representing a 179% year-over-year increase. Additionally, its revenue from continuing ADS operations was $0.15, up 189% year-over-year.
Analysts expect CX’s EPS and revenue to grow 192.8% and 6%, respectively, year-over-year to $0.17 billion and $4.09 billion. dollars for the quarter ending June 30, 2022. Over the past month, the stock price has declined 8% to close yesterday’s trading session at $5.18.
CX’s POWR ratings reflect a strong outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. Plus, it has a B rating for value and quality. To see the additional POWR rating for CX (Growth, Stability, Sentiment and Momentum), Click here. It is ranked #21 in the Industrial – Building Materials industry.
CRH shares fell $0.03 (-0.07%) in premarket trading on Friday. Year-to-date, the CRH is down -12.72%, compared to a -7.14% rise in the benchmark S&P 500 over the same period.
About the Author: Nimesh Jaiswal
At Nimesh Jaiswal a fervent interest in the analysis and interpretation of financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving the price of a stock is the key approach he follows while advising investors in his articles.
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