Texas Industries (NYSE: TXI ) , the Dallas-based cement and related products company, may have uncovered a wonderful new approach to investor relations on Thursday: Simply release your soft quarterly results on days when the market climbs nearly 300 points and watch your share price rise by roughly 7% above the prior day's close.
While the company's share price results for the day were obviously unexpected, that's the way things shook out. With the effects of bad weather and slowing construction activity, the company earned $30.1 million, or $1.09 a share, for the quarter ended May 31. That's compared with $41.9 million, or $1.58 per share, in the same quarter a year earlier. Included in the year-ago quarter was an after-tax gain of $0.45 from a real estate sale. Texas Industries shares, which closed at $78.57 on Wednesday, ended up climbing as high as $86 on Thursday before "cooling" to $83.94.
I think there were probably a couple of drivers to the company's surprisingly large pop. First, the May quarter concluded the company's 2007 fiscal year, in which, as CEO Mel Brekhus noted, there was a 40% net income increase, compared with 2006, "once large individual transactions in both years are excluded." Perhaps in the case of this company, the market is looking beyond weather-related quarterly blips in favor of a longer-term approach. Wouldn't that be novel?
But in addition, on Wednesday it was announced that structural steel manufacturer Chaparral Steel (Nasdaq: CHAP ) , which until two years ago was a unit of Texas Industries, will be acquired by Gerdau Ameristeel (NYSE: GNA ) . That announcement turned my thoughts -- and likely those of others -- to the likelihood of an acquisition of Texas Industries.
The company operates three cement plants and produces aggregates and related consumer products. And with about three-fourths of U.S. cement capacity gobbled up by overseas producers during the past few decades, my noting that Texas Industries is an obvious takeover candidate should not be categorized as a stroke of genius. Neither is an observation that, even in the face of housing market softness, cement demand in the U.S. is likely to significantly exceed domestic production for about as far as the eye can see.
So, Fools, it seems to me that all these elements render in Texas Industries a sound company operating in a solid industry. It clearly appears deserving of concrete observation and attention.
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Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your questions or comments. The Motley Fool has a disclosure policy more binding than cement.
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