On Tuesday, Barclays (LON:BARC) adjusted its outlook on CEMEX (NYSE: CX) stock, reducing the price target to $8.00 from the previous $9.00, while continuing to endorse the stock with an Overweight rating. The decision follows CEMEX's strategic moves to streamline its portfolio by selling off non-essential assets, a process that is expected to generate total proceeds of $2.2 billion. The conclusion of these divestitures will see the company's core regions— the United States, Mexico, and Europe—account for approximately 90% of its consolidated EBITDA.
In the third quarter, the U.S. market was a significant contributor to CEMEX's earnings before interest, taxes, depreciation, and amortization (EBITDA), representing about 35% of the total. This was despite some operational challenges due to unfavorable weather conditions in Texas and Florida. The company's performance in the U.S. showcased stability in margins year-over-year and a robust regional presence.
Looking beyond the third quarter, CEMEX anticipates continued robust demand in the infrastructure and residential sectors. The unallocated funds from the Infrastructure Investment and Jobs Act (IIJA) are expected to bolster a positive outlook for the company into 2025. The IIJA funding is set to play a pivotal role in supporting CEMEX's market position and financial health in the coming years.
CEMEX's strategy of divesting non-core assets and focusing on key markets is designed to optimize its portfolio and enhance profitability. The company's ability to maintain stable margins amid external challenges and its strategic positioning to capitalize on upcoming infrastructure spending signal a potentially strong performance trajectory.
Barclays' revised price target reflects a nuanced view of CEMEX's financial prospects, considering both the recent asset sales and the expected future benefits from infrastructure investments. The Overweight rating indicates that Barclays maintains a positive stance on the stock's potential despite the lowered price target.
3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads. In other recent news, Cemex, a global leader in the building materials industry, faced a downgrade from JPMorgan (NYSE:JPM) from Overweight to Neutral, following third-quarter earnings that fell short of expectations. The firm's decision was influenced by a lack of significant fundamental catalysts expected until mid-February and anticipated subdued fourth-quarter results. JPMorgan's analysis suggests that Cemex's free cash flow generation is not yet at a level that would support both an increasing dividend and reasonable share buybacks, a concern for investors as the shares are trading at a discount.
In the third quarter, Cemex reported adjusted earnings per share of $0.14, missing the projected $0.20, and revenue of $4.09 billion, below the consensus estimate of $4.26 billion. Despite the earnings miss, Cemex's net income experienced a significant growth of 222% to $406 million. The company attributed the earnings shortfall to adverse weather conditions across all its markets and significant foreign exchange movements.
Moreover, Cemex announced divestments of $1.4 billion during the quarter, part of its portfolio optimization efforts, bringing the year-to-date announced divestitures of non-core assets to $2.2 billion. Geographically, Cemex saw sales declines in Mexico, the United States, and South, Central America, and the Caribbean, with a minor increase in the Europe, Middle East, and Africa region. Lastly, the company reported progress in its climate action initiatives, including a reduction in year-to-date scope 1 and 2 CO2 emissions and a €157 million EU Innovation funding for a carbon capture project in Germany.
