CEMEX's Run May Not Be Over, But Project Uncertainty Is A Key Risk

Not unlike Insteel (IIIN), which I wrote about recently, Cemex (CX) has benefited from an unexpected surge in construction activity in the second half of the year, with most markets seeing a V-shaped recovery. I believe management deserves kudos for how it handled a challenging year – reducing costs and preserving liquidity through Operation Resilience, but still maintaining the operational flexibility to serve the sudden snapback in demand in the second half of the year.

I’m hesitant to just assume a “new normal” and that all of the challenges that had been dogging Cemex for years (including three years of poor stock market performance in 2017-2019) are now resolved, but even before this resurgence in demand I thought management had been doing a good job of restructuring the asset base and running the company more efficiently.

I can see a path to a share price over $8.50 in the relatively short term, and I do believe there will be some sort of federal stimulus package in the U.S. that supports infrastructure construction. That may, conversely, be the time to think about selling as I don’t think the fundamental cyclicality of this business has, or will, go away, and I believe expectations of stimulus-funded project demand has already started moving into the valuation.

 

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CEMEX's Run May Not Be Over, But Project Uncertainty Is A Key Risk