UPDATE: Longbow Upgrades Texas Industries, Core Markets Still Very Attractive

In a report published Friday, Longbow Research analyst Garik Shmois upgraded the rating on

from Neutral to Buy, and named a $69.00 price target. In the report, Longbow Research noted, “We are upgrading TXI to a BUY with a $69 12-month target price which is based on 8.5x PV of peak FY17E EBITDA of $355M. TXI shares have pulled back 18% over the last week. We believe pricing concerns are overblown and that tight market supply will ultimately lead to a 6% pricing CAGR over the course of the up-cycle. This should translate to an annual 45-50% earnings CAGR. Consequently, we believe that a rising tide that is a sustained construction recovery in both markets will again lift TXI. TXI's core markets should grow high single digits to low teens long term, and we believe the TX market will be able to absorb TXI's Hunter 1 capacity addition next year while staying in supply/demand balance. This should lessen TXI's need to price below market rates to secure volume. Historically, when cement markets are at 90% utilization rates, prices have increased an average of 6% annually.” Texas Industries closed on Thursday at $55.42.