Shares of global cement giant CEMEX (NYSE:CX) rose 11% on July 27 following the company's second-quarter 2020 earnings update. Interestingly, the headline on the release didn't actually reference earrings, but that was for a good reason.
The headline numbers here weren't particularly good. CEMEX saw its sales drop 10% year over year in the second quarter, with EBITDA lower by 6%. Earnings from continuing operations came in at just $0.01 per share, down from $0.06 per share in the second quarter of 2019, an 87% decline. It was a rough quarter no matter how you cut it. However, the results beat market watchers' expectations of a loss of $0.02 per share.
Of note, the company's cost-cutting efforts allowed it to improve its EBITDA margin by 70 basis points. (This, by the way, was the information that was used in the title of the earning announcement.) There was also a small bit of positive news at the business unit level, but you had to sort through a lot of ugly updates to see it. Specifically, revenue in Mexico (20% of first-quarter sales) was off by 10%, sales across the rest of South America (10%) were lower by 13%, and Europe, the Middle East, Asia, and Africa (35%) saw a 13% top-line decline, too. However, the U.S. market, which accounts for 35% of revenue, saw a sales increase of 1% despite the headwinds posed by the COVID-19-related economic shutdowns. So, even in these difficult times, there's still a little bit of silver on the dark clouds.
It would be hard to call this a good earnings report for CEMEX, but it certainly wasn't terrible given the circumstances. That the company was able to beat Wall Street expectations was, in fact, a fairly notable achievement. And cost cutting clearly had a positive impact, too. Investors reacted positively, which makes sense. That said, long-term investors should probably tread with caution. The impact of COVID-19 is far from over and the extent of the damage still isn't clear.