Shares in Mexico-based cement maker Cemex
Built into this worry is the company's exposure to some of the hardest-hit markets in the country, like Florida, California, and Nevada. Add in states like Texas, and these regions comprise roughly 8% of the cement maker's revenue. That's why, when Cemex forecast a 6% drop in income at the beginning of the summer, the stock began its descent.
Coupled with its winning bid for Australian cement producer Rinker, it's easy to see why Wall Street has been fleeing the concrete king -- Rinker derives about 44% of its revenue from U.S. markets, primarily in Florida. Furthermore, there seems to be no end to the housing pain in sight. The house of cards built by Beazer Homes
Yet all this sinking and settling is overdone. While the immediate effects of the housing slump are nibbling at Cemex's numbers, the company has positioned itself for an eventual recovery, even if it is in late 2008, as some analysts surmise.
As part of its bid to have the Rinker deal approved, the company will be shedding assets in Florida and Arizona. Irish cement maker CRH wants to buy as much as $4.5 billion of those assets. Cemex has also announced plans to build a $400 million cement and concrete products plant in Arizona, which will be operational by 2012. The company is laying the foundation for tomorrow's building boom, and investors ought to be getting interested in what it's got in the mix.
According to commercial real estate developer CB Richard Ellis
Combine the company's strength and smart positioning with a reasonable valuation that is roughly in line with fellow major cement player Lafarge
For related Foolishness:
Cemex is a recommendation of Motley Fool Stock Advisor and Motley Fool Global Gains. See why both market-beating services have cemented this company's position in their list of recommendations with a 30-day risk-free trial subscription to either.
Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. Bank of America is an Income Investor pick. The Motley Fool has a disclosure policy.