A Lack Of Catalysts Sinks Cemex Rating

Analysts at Bank of America parted ways with their bullish stance on Cemex SAB de CV (ADR) CX, a Mexico-based company that mostly works in the production, distribution, marketing and sale of cement and other products. The firm's Carlos Peyrelongue downgraded Cemex's stock rating from Buy to Neutral with a price target slightly boosted from $10.60 to $10.70.

Cemex's Mexican operations could see a tailwind from a stronger Mexican peso, but this is overshadowed by a lack of positive catalysts in both the Mexican and U.S. markets, Peyrelongue said. Also, the company's international operations in the Philippines and Egypt are expected to remain soft, and the company could lose market share and see margin pressures.

Meanwhile, absorption of July's planned price increase for cement was "soft" while new capacity and lower demand negatively impacted the market, Peyrelongue continued. But the Street was likely pricing in "strong" absorption of the price hike and this could add additional pressure to the stock. Looking forward, Cemex does stand to benefit from multiple catalysts in the U.S., including an underlying construction recovery and infrastructure spending from various levels of government. But the analyst sees risks of "disappointment" from soft absorption of October's price hike in Texas due to the damages from Hurricane Harvey and delays in funding from the Fixing America's Transportation Act.

Finally, the analyst's outlook does include upside risk from the approval and implementation of tax reform from the White House.

Related Links: Benzinga's Top Upgrades, Downgrades For August 29, 2017 An Intelligent Infrastructure ETF _______ Image Credit: By Pedro Felipe (Own work) [CC BY-SA 4.0 (http://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia Commons