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Why U.S. Concrete Stock Rose 12.5% in February

By Reuben Gregg Brewer – Updated Apr 11, 2019 at 11:19AM

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U.S. Concrete's shares moved higher last month, but there's still a long way to go after a tough 2018.

What happened

Shares of U.S. Concrete (USCR) gained 12.5% in February, according to data provided by S&P Global Market Intelligence. That advance, however, came in the wake of horrid performance in 2018: Through February, the stock had lost roughly half its value since the start of last year. But the news here isn't all bad.

So what

As U.S. Concrete's name implies, it sells concrete and aggregates. These are largely used in the construction space, which is an economically sensitive industry. Last year, investors were increasingly concerned that global trade tensions, especially between the United States and China, would lead to an economic downturn. Now add to that difficult weather conditions in 2018, which made it physically harder to actually build things, and you can see why investors soured on U.S. Concrete.   

Check out the latest earnings call transcript for U.S. Concrete.

Two men at a construction site, one holding blueprints and the other a hard hat

Image source: Getty Images.

As the new year got underway, however, investors started to have a more optimistic economic outlook. In February, there were additional positive signs, including a solid U.S. gross domestic product reading and an apparent thawing in the negotiations between China and the United States. Plus, in the back half of the month, U.S. Concrete released earnings that showed it was doing OK.   

Revenue at the construction materials provider rose just under 13%, driven by 7.7% growth in its core concrete operations and a massive 101% increase in aggregates revenue. The huge jump in aggregates was related to an acquisition, which management reports is proving more beneficial than originally expected. Earnings were up nearly 14% year over year in 2018. The company expects continued economic strength, but warned that weather is a wild card that it can't predict.    

Now what

U.S. Concrete is a relatively small company with a roughly $680 million market cap. It also operates in a cyclical industry. Conservative investors should probably avoid it. That said, if you're bullish on the economy and construction activity, then you might want to take a closer look. Just bear in mind that the current economic expansion is one of the longest on record and will -- eventually -- end.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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