We recently published an article on the 7 Best Construction Stocks To Buy According to Analysts. In this article, we will look at where CEMEX, S.A.B. de C.V. (NYSE:CX) ranks among the best construction stocks to buy according to analysts.
The recent 50 basis point rate cut has given a significant boost to the market and put a lot of industries into focus. The construction industry could also benefit significantly from the cuts as lower interest rates reduce borrowing costs, increase demand for real estate, encourage infrastructure investment, and boost consumer spending. This leads to more construction projects and supports overall growth in the sector.
According to a Research and Markets report, the U.S. construction industry is set to grow by 5.6% in 2024, reaching $1.27 trillion, with a projected annual growth rate of 4.7% through 2028, reaching $1.53 trillion. The growth is supported by government policies focused on infrastructure development and efforts to bring manufacturing back to the U.S. Despite some cost pressures, major projects such as data centers and infrastructure investments are expected to drive industry growth.
Population Shifts and Industry Trends Reshape U.S. Construction Outlook
According to FMI corporation’s 2024 North American Engineering and Construction Outlook: Third Quarter, U.S. construction in 2024 is expected to surpass $2 trillion for the first time, a 6% increase from 2023. However, growth is projected to slow to around 3-5% annually over the next five years.
In residential construction, a mixed trend is emerging, with single-family home construction projected to grow by 7%, while multifamily construction may decline by 25%. Non-residential construction is set for 6% growth, driven by public safety and manufacturing sectors, each seeing over 20% growth. Heavy civil sectors, like power and transportation, are expected to rise by 8%.
The report emphasizes the influence of population shifts on construction activity, especially as people move from states like California and New York to Texas and Florida, which could boost construction in those regions. Despite future slowing growth, FMI noted that the upcoming five years will still mark some of the highest levels of construction spending since 1965.
The report discusses how political backing for renewable energy, electric transportation, and power systems will persist, with grid planners projecting a 5% annual growth rate through 2028. Data center power needs are expected to triple by 2030, while the oil and gas sector continues to expand infrastructure.
Infrastructure spending will remain elevated, although growth may slow as Infrastructure Investment and Jobs Act (IIJA) funds taper off after 2026. Bridge investments are leading highway construction projects, and future political discussions may increase funding for infrastructure.
Moreover, the EPA has identified a $630 billion funding gap for wastewater infrastructure, and the U.S. will need $650 billion over 20 years to improve water systems, mainly for repairing distribution networks. Federal funding from the IIJA and programs under the Safe Drinking Water Act will help support these projects. Investments in dams and coastal protection are also growing, focusing on environmental protection and resilience.
Our Methodology
For this article, we identified nearly 40 construction stocks through ETFs and stock screeners with a market cap of over $5 billion. We narrowed our list to 7 stocks with the highest average analyst price target, as of September 25. Finally, we also mentioned the hedge fund sentiment around each stock which was taken from Insider Monkey’s database of over 900 elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
CEMEX, S.A.B. de C.V. (NYSE:CX)
Average Analyst Price Target Upside: 45.10%
Number of Hedge Fund Holders: 22
CEMEX, S.A.B. de C.V. (NYSE:CX) is a Mexican multinational building materials company based in San Pedro, Nuevo León. It is recognized as one of the largest cement producers globally. It operates in over 50 countries with a diverse product range including cement, ready-mix concrete, and aggregates. It tops our list of the best construction stocks to buy according to analysts.
The company’s solutions are designed to meet the evolving needs of its customers, from sustainable building materials to advanced construction technologies. The company was founded in 1906 and over the years it has expanded through strategic partnerships and acquisitions.
On September 3, CEMEX (NYSE:CX) announced its acquisition of a majority stake in RC-Baustoffe Berlin GmbH & Co. KG, a recycling firm within the Heim Group. The acquisition will complement its Regenera division, which focuses on providing circular solutions to prolong the life cycle of construction materials through their reuse in value-added products.
The recycling facility can process up to 400,000 tons of material annually, transforming it into repurposed aggregates for concrete production and reintegrating them into the construction sector.
Analysts have quite bullish sentiments on CEMEX (NYSE:CX) as it has been covered by 18 analysts and a majority of them maintain a Buy-equivalent rating on the company stock. Their average price target of $9.25 represents an upside of 45.10% to the company’s stock at current levels on September 25.
On August 21, The Fly reported that JP Morgan resumed coverage of the company with an Overweight rating and a price target of $8. Despite a generally bearish outlook on the U.S. construction materials sector, the analyst finds the company’s stock valuation to be “extremely attractive.” The firm views its recent divestments as a positive move, which would increase its exposure to less favorable emerging markets and strengthen its balance sheet.
On September 9, CEMEX (NYSE:CX) received a Buy rating from Barclays analyst Benjamin Theurer with a $9 price target.
Overall, CX ranks 2nd on our list of the best construction stocks to buy according to analysts. While we acknowledge the potential of CX as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is promising and trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure. None. This article was originally published on Insider Monkey.