Morgan Stanley cuts CEMEX stock rating to Equalweight, PT steady at $8

On Wednesday, Morgan Stanley (NYSE:MS) downgraded shares of CEMEX (NYSE:CX) from Overweight to Equalweight, maintaining a price target of $8.00. The decision came after adjustments to estimates to align with CEMEX’s fiscal year 2025 guidance, new foreign exchange and macroeconomic forecasts. The construction materials giant, currently trading at $6.28 with a market capitalization of $9.1 billion, maintains a relatively modest P/E ratio of 9.68. InvestingPro analysis reveals several additional valuation metrics and growth indicators that could influence investment decisions. The revision also takes into account a tougher operating environment in Mexico compared to previous expectations.

Stifel analysts cited a projected decline in Mexican cement volumes of approximately 10% by 2025, a decrease from the prior estimate which anticipated a stable year-over-year volume. This anticipated volume reduction is accompanied by a slight dip in profitability, with cement EBITDA per ton expected to fall from $83 to $78 due to persistent energy challenges in Mexico’s northern region.

Despite the downbeat outlook for Mexico, Morgan Stanley’s estimates for CEMEX’s operations in the United States remain largely unchanged, although residential demand continues to pose challenges. However, the firm has increased its projections for CEMEX’s Europe, Middle East, and Africa (EMEA) segment, reflecting a more optimistic view of profitability and top-line growth based on stronger performance in the fourth quarter of 2024 and beyond.

At the consolidated level, Morgan Stanley’s revised EBITDA forecast for CEMEX in 2025 is 4% lower than their previous model, now standing at $3.0 billion, compared to the current EBITDA of $2.67 billion. This figure is in close agreement with the guidance provided by CEMEX. Despite the downgrade, the price target remains unchanged at $8.00 per share, which implies an expected return of approximately 30%. According to InvestingPro analysis, CEMEX appears undervalued based on its Fair Value model, with analyst targets ranging from $6 to $12 per share. For deeper insights into CEMEX’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

The downgrade reflects Morgan Stanley’s recalibrated expectations for CEMEX, factoring in the latest company guidance and broader economic indicators. The firm’s analysis suggests a cautious outlook for CEMEX’s performance in Mexico, balanced by a stable view of the U.S. market and an improved perspective for the EMEA region.

In other recent news, Cemex S.A.B. de C.V. has disclosed its consolidated and separate financial statements for the years ending December 31, 2024, 2023, and 2022, which are pending approval at the upcoming Ordinary General Shareholders’ Meeting. Additionally, the company has released its 2024 Integrated Report, emphasizing its commitment to sustainability and detailing efforts to reduce its carbon footprint and enhance energy efficiency. In a strategic move, Cemex is reportedly considering the sale of its Colombian operations to focus more on North America and Europe, with potential buyers including Holcim Ltd (OTC:HCMLY). and Cementos Molins. Furthermore, Cemex has announced the results of its Ordinary General Shareholders’ Meeting, with Rogelio Zambrano Lozano elected as the Executive Chairman of the Board. The company has also proposed a cash dividend and set a maximum amount for acquiring its own shares, alongside other agenda items for the upcoming shareholder meetings. New appointments to various committees, including the Audit Committee and the Sustainability, Climate Action (WA:ACT), Social Impact, and Diversity Committee, have been made to strengthen corporate governance. These developments reflect Cemex’s ongoing efforts to enhance sustainability practices, streamline operations, and uphold robust corporate governance.

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