Back Up a Truck for Cemex

Here's one way for a building materials company to negotiate a U.S. housing collapse and look solid in the process: Simply buy a competitor with big assets in North America, thereby sending your year-over-year comparisons through the roof.

That clearly wasn't Mexico-based Cemex's (NYSE: CX  ) intention, but the company nevertheless benefited from its acquisition last year of Australia's Rinker Materials. Thanks heavily to the new Rinker contributions and despite a continuing train wreck in the U.S. housing market, Cemex was able to report a net sales increase of 43% in the U.S. Overall net income increased by 18%, to $470 million, from last year's $400 million. A significant amount of the quarter's improvement resulted from the $257 million brought in through its unloading of a 9.5% stake in Mexican telephone company Axtel.

Cemex improved its operating results in most of its widespread geographic locations. Its net sales were up slightly in Mexico and Spain, hit double-digit growth across most of its other locations, and -- drumroll please -- were up 386% year over year in Asia and Australia. But lest you assume the last-named area must be undergoing an unbelievable building boom, keep in mind the bulk of that increase is largely attributable to the newly acquired Rinker operations.

During the conference call following the company's release, Hector Medina, Cemex's EVP for planning and finance, predicted, "For the full year 2008 we expect EBITDA of about $5.6 billion ... This represents an increase of approximately $525 million over pro forma 2007 EBITDA ..."

Nevertheless, the management of Cemex expects the U.S. residential sector to continue to decline throughout this year. According to the company, the result could be a nearly 24% drop in housing-related demand for cement. The negative sentiment was echoed by wallboard giant USG (NYSE: USG  ) yesterday morning, and we'll get more of an inkling about the nation's housing's health with impending results from Ryland (NYSE: RYL  ) and Pulte (NYSE: PHM  ) .

All in all, however, I can't for the life of me justify a forward 2008 P/E of just 11 for Cemex. I rarely suggest that Fools back up a truck and haul away a load of any stock, but I'll make an exception here.

Related Foolishness:

Read/Post Comments (0) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 628187, ~/Articles/ArticleHandler.aspx, 10/24/2016 11:57:32 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,238.82 93.11 0.51%
S&P 500 2,150.83 9.67 0.45%
NASD 5,303.28 45.87 0.87%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/24/2016 11:41 AM
CX $9.10 Down -0.04 -0.44%
Cemex CAPS Rating: ***
PHM $19.10 Up +0.04 +0.18%
PulteGroup CAPS Rating: ***
RYL.DL $0.00 Down +0.00 +0.00%
The Ryland Group CAPS Rating: **
USG $27.26 Up +0.53 +1.98%
USG CAPS Rating: ****