Improving performance
With 40 facilities across the U.S., Eagle Materials, Inc. (NYSE:EXP) is involved in the manufacturing and distribution of aggregates and the cement business, gypsum wallboard, and recycled paperboard. Demand of its products is driven by new home construction, especially the gypsum wallboard, which is manufactured by the company in five different plants. Gypsum is experiencing robust demand, with a price increase of 23% in the last quarter. This should boost profits.
The company is experiencing higher performance than the industry average. Its revenue increased 37% in the first quarter year-over-year, when most companies are losing money. Operating margin is 12.2% against 4.3% for the industry, which is a very good sign. Moreover, its earnings margin has been solid over the trailing- 12 months, a good trend to consider.
The company’s current debt load is at $489.3 million. This level is not something to worry about, since its debt/cap ratio remains at 41%, quite lower than its peers. Hence, I see Eagle Materials, Inc. (NYSE:EXP) as the best performer within these three companies.
Bottom line
If the U.S. housing market and demand for construction materials continue to grow at a steady pace, all of these companies will improve their results. Since this recovery is expected to continue, we might see nicer earnings results coming in. My take is that Eagle Materials, Inc. (NYSE:EXP) is positioned to realize better performance than Cemex SAB de CV (ADR) (NYSE:CX) and Texas Industries, Inc. (NYSE:TXI). This company has surfed the crisis in relatively good shape. Plus, its tighter relation to the housing construction sector gives it a better potential in case demand for construction aggregates improve.
Regarding Cemex SAB de CV (ADR) (NYSE:CX) and Texas Industries, Inc. (NYSE:TXI), I see two problems. First, their current loss is taking place in a period when other construction-related companies have returned to profitability. Second, these companies made big investments before the housing crisis in 2007 and 2008. This increased their capacity, but the generated debt will keep impacting negatively on their balance sheets in the next quarters.
For Cemex SAB de CV (ADR) (NYSE:CX), the perspective is even worse. The U.S. housing market recovery could boost its profitability, but the recession in Europe and its severe drop in demand will still bring problems in sales and profits.
The article 3 Cement Companies to Consider in a Recovery originally appeared on Fool.com is written by Louie Grint.
Louie Grint has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Louie is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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