Weak Infrastructure Affects CEMEX

Recently, CEMEX, S.A.B. de C.V. (CX - Snapshot Report) reported fourth quarter and fiscal year 2009 results. During the quarter, Cemex reported an EPS of 28 cents compared to a loss of 96 cents in the year ago quarter. Reported EPS was much above the Zacks Consensus Estimate of loss per share of 7 cents. During full year 2009, EPS was 52 cents, up from 7 cents in 2008 and 34 cents anticipated by the Zacks Consensus.

Net sales were $3,444 million and $14,544 million in the fourth quarter and full year 2009. They were down from $4,148 million and $20,131 million respectively. The decline in sales resulted from lower volumes and prices mainly from the U.S. and Spanish operations.

The infrastructure sector, which continues to be the main driver of demand in most of its markets, is currently weak. Based on this, 3 out of 10 analysts revised their estimates in the negative direction in the last 30 days with no analysts revising in the positive direction.

In the last 30 days the Zacks Consensus Estimate for the fiscal year 2010 has come down from 21 cents to 10 cents currently. For the first quarter of fiscal 2010, the Zacks Consensus Estimate declined from a loss per share of 8 cents to a loss per share of 16 cents. Thus, the short-term rating on the stock remains a Sell with Zacks #4 Rank.

With respect to earnings surprises, Cemex’s track record has been positive in the preceding four quarters with three positive and one negative surprises. It produced an average positive earnings surprise of 150.45% over the last four quarters, meaning that it has beaten the Zacks Consensus Estimate by that measure over the trailing 12 months.

Although the overall economic situation is still uncertain, we do see some signs of economic recovery in the key U.S. market. Moreover, the company is making a genuine effort to reduce operating costs and net debt. Thus, our long-term recommendation on the stock remains Neutral.

Read the full analyst report on CX