Citi cuts Eagle Materials stock rating to neutral, lowers target

On Monday, Citi analysts adjusted their stance on Eagle Materials shares (NYSE:EXP), downgrading the stock from Buy to Neutral and reducing the price target to $280 from the previous $334. The revision comes as part of Citi's 2025 Outlook, which also includes changes to estimates and top picks among various sectors.

According to InvestingPro data, Eagle Materials currently trades at a P/E ratio of 17.4, with the stock appearing slightly overvalued based on InvestingPro's proprietary Fair Value model.

The downgrade reflects a cautious perspective after a year marked by declines in housing starts, repair and remodel (R&R) spending, and aggregate and cement volumes. Looking ahead, Citi analysts anticipate only a very modest rebound in 2025.

They expect housing starts to increase slightly by 1% year-over-year to 1.36 million, with low single-digit percentage growth in single-family homes being partially offset by weakness in the multi-family segment.

Citi's outlook also includes an expectation for new home prices to decrease by 1% in 2025 as mortgage rates remain high, with projections of mid-6% rates by year-end. These factors contribute to the more neutral view on Eagle Materials, which operates in the building materials industry.

Despite the downgrade for Eagle Materials, Citi has expressed a preference for the Construction Materials sub-sector, naming CRH (NYSE:CRH) as their top pick due to the expected benefits from the Infrastructure Investment and Jobs Act (IIJA) and strong backlogs. Additionally, Citi analysts have upgraded AZEK to Buy, signaling selective optimism within the Building Products sector.

For the R&R segment, after a decline in 2024, Citi projects a 4% year-over-year increase in spending for 2025. Nonetheless, the analysts maintain a cautious approach to Homebuilders, citing high sensitivity to the elevated mortgage rates that are expected to persist.

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