Last June, Motley Fool writer Bill Mann was checking out large cement companies like Cemex
Florida Rock is one of the U.S.'s leading producers of construction aggregates, a major provider of ready-mixed concrete and concrete products in the Southeastern and Mid-Atlantic States, and a significant supplier of cement in Florida and Georgia. And, as you would expect when prices are strong, it reported record earnings yesterday for fiscal year 2004 (which ended in September).
What many investors may not have been prepared for was a decrease in fourth-quarter per-share earnings. (Net income was up slightly, but an increase in outstanding shares caused earnings per share to decline.)
The Florida market, while delivered pricing improvements in the fourth quarter in all segments, saw disruptions from four hurricanes and a decline in railroad delivery reliability. That disruption lessened aggregate volumes year over year by 1.9% and by 5.9% from Q3 2004.
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The next fiscal year looks bright for Florida Rock. Analysts expect the company to earn $3.02 a share -- 17 times forward earnings. Although a 27% increase in sales and a 50% jump in net income are not expected, the company has used its strong free cash flow this year to build cash, cut long-term debt by 65%, and make strategic acquisitions. It's a classic case of rock-solid performance yielding a hard-as-rock balance sheet.
The stock is up 38% from year-ago prices, and the company has delivered 50% earnings growth even after four hurricanes (something Mother Nature will hopefully not repeat anytime soon). Investors were wise to worry about what would happen when the cement shortage ends. But with a strong balance sheet and strong earnings ahead, Florida Rock is setting itself up to weather a very strong storm.
Fool contributor W.D. Crotty owns stock in Home Depot.