After posting sharp losses on Tuesday and Wednesday, the stock price of Cemex SAB de CV (ADR)(NYSE:CX) took a break and consolidated to close almost flat at $7.01. It was the sixth day of decline as concerns over Chinese economic slowdown and in other developing economies tossed building-material stocks.
Cemex shares declined 0.07% to $7.01 on NYSE index, which declined 0.34% on Thursday. The Mexican peso made a record low on Thursday and has declined 20% against the U.S. dollar in the past one year.
The prevailing problems
The currency decline combined with slowing growth worldwide are the two factors creating problems for Cemex. While 80% of company’s cash flow generates from Latin America, 80% of its total debt is U.S. dollar denominated, resulting a big foreign currency “mismatch”, adversely affecting the stock performance. There are increased about economic growth on international platform.
The view
While Cemex has reported price increases in domestic currency, that won’t balance for such a sharp depreciation in developing market exchange rates. Morgan Stanley analysts Lilian Starke and Nikolaj Lippman reduced their price target to $11 per share from $13 per share in a report issued on September 17, 2015, stating that the performance will suffer as long as macro volatility continues or until management reduces debt and risk. However, the analysts’ retained an ‘overweight’ recommendation on Cemex stock.
The market
When assessing the construction industry, the easiest mode to break it up is in commercial and residential construction. Residential is quite easy, homes whereas Commercial market is a bit more complex. Cemex, Jacobs Engineering Group Inc (NYSE:JEC) and Federal Realty Investment Trust (NYSE:FRT) are three firms to keep an eye on in commercial construction. Cemex, the global cement firm certainly needs a notice since cement forms the basic building base of all the things from roads to foundations, wells and walls.
