Costs, End-Market Demand, And Value Creation All Still Challenging For Cemex

Given its exposure to the U.S. residential market, Mexico, and other emerging markets, Cemex (CX) has been dead-center in the middle of what investors really don’t want over the past six months or so. The shares are down about a third over the past year (and down about 25% over the past six months), but at least the company isn’t alone - Argos (OTCPK:CMTOY), Buzzi (OTCPK:BZZUY), Heidelberg (OTCPK:HDELY), LafargeHolcim (OTCPK:HCMLY), Pacasmayo (CPAC), and Elementia (OTC:ELLMF) have all been varying shades of lousy over the same time periods, though Pacasmayo and LafargeHolcim have held up a little better.

I continue to believe that the market has overreacted as it relates to the economic and construction market outlooks for Mexico under the new government, but I do see real risk of U.S. construction (both residential and non-residential) slowing in 2019, and I think Cemex needs to do more in terms of cost reductions and portfolio adjustment (i.e., asset sales) to improve investor confidence. While the shares do not look aggressively valued, it’s hard to get excited about the company unless and until it can consistently outperform on EBITDA and FCF.

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Costs, End-Market Demand, And Value Creation All Still Challenging For Cemex