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Why Eagle Materials Stock Surged 16% in January

By Matthew DiLallo – Updated Apr 25, 2019 at 5:03PM

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Several factors combined to drive up the building material maker’s stock last month.

What happened

Shares of Eagle Materials (EXP -2.22%) rallied 16.3% in January, according to data provided by S&P Global Market Intelligence. Driving up the construction material producer's stock were its fiscal third-quarter results and news that the Trump administration wants to revive its proposed infrastructure plan.

So what

In mid-January, senior officials within the Trump administration met to work on ways to resurrect the president's infrastructure investment plan. The stalled initiative was aimed at spurring at least $1 trillion in spending on roads, bridges, and other much-needed projects. This effort to revive the infrastructure plan sent the stocks of heavy construction material producers like Eagle Materials higher last month since they stand to benefit from the increased construction-related spending from this proposed initiative.

Silhouette of a construction team working on a project.

Image source: Getty Images.

Also driving the stock last month were Eagle Materials' fiscal third-quarter results. While the company reported lower revenue and earnings versus the prior-year period, that was mainly due to some one-time issues. Adjusting for those items, demand for the company's building products grew by a low-single-digit rate last year. The company also provided a positive outlook for the coming year, noting that "the basic underlying fundamentals of low unemployment, low interest rates, and higher wages remain favorable" for continued demand growth for its construction materials.

Check out the latest Eagle Materials earnings call transcript.

Now what

Stalled progress on the infrastructure plan along with concern about an impending economic slowdown weighed on shares of Eagle Materials last year, pushing them down more than 45%. However, with the economy showing signs of strength, and the president working to revive his infrastructure plan, investors are hoping that demand for construction materials will increase in 2019. If that happens, then Eagle Materials' stock could continue rebounding.

On the other hand, if either catalyst fizzles out, then shares could quickly give back last month's gains, which is why investors might want to wait for more clarity on both factors before they consider this materials stock.

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool recommends Eagle Materials. The Motley Fool has a disclosure policy.

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