Cemex's Prospects Improving
We think the firm’s U.S. and Mexico exposure will drive significant increases in free cash flow.
We think the market underestimates Cemex's (CX) growth prospects, catalyzed by improving U.S. residential construction activity and rising Mexican infrastructure investment. The company's fortunes are tied to local construction activity in each of its six regions: Mexico, United States, Northern Europe, Mediterranean, South America and Caribbean, and Asia. We expect Cemex's geographic footprint to enjoy roughly 6% average annual demand growth through 2021, one of the highest growth rates across our global cement coverage. Our demand growth forecast represents a material acceleration from the 2.5% average of the past five years.
U.S. cement consumption collapsed amid the financial crisis and has mustered only a halfhearted recovery due to disappointing residential construction spending. We expect U.S. cement demand to improve over the next five years, driven by a recovery in cement intensity as residential construction spending normalizes. We forecast U.S. cement demand growth of 4%, on average, from 2015 to 2021. Rising capacity utilization should set the stage for robust price increases and margin expansion.
Kristoffer Inton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
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