Texas Industries Earnings Preview: Narrower Loss, Revenue Growth Expected

Texas Industries

, shares of which are trading near a multiyear high, is scheduled to report its second-quarter fiscal 2013 results Wednesday, January 9, after the markets close. Investors will be looking for improved gross margins on lower costs and another quarter of better-than-expected revenues on improved operating conditions.

Analysts on average predict that Texas Industries will report that revenue grew less than four percent year-over-year to $161.66 million. But a net loss of $0.32 per share is expected. That compares to a net loss of $0.64 per share in the same period of last year. Individual earnings per share (EPS) estimates fall in a range from $0.16 to $0.58. Note that only once in the past six quarters has Texas Industries offered an upside surprise on the consensus EPS estimate. Back in the first quarter, Texas Industries per-share fell short of expectations despite the revenue beat. The company attributed results in part to low levels of construction activity California and Texas. The share price pulled back more than three percent following the earnings release, but quickly resumed its upward trend. For the current quarter, analysts so far expect to see a net loss of $0.48 per share, which would be narrower than in the year-ago period. That consensus estimate has narrowed in the past 60 days from a net loss of $0.52 per share. The consensus forecast also has revenue that is more than four percent higher year-over-year to $ 140.49 million.

Texas Industries manufactures and sells cement and other heavy construction materials, primarily in the southwestern United States. It has a market capitalization near $1.5 billion, was founded in 1946 and is headquartered in Dallas, Texas. Melvin Brekhus has been president and chief executive since June 2004. Competitors include Cemex

and Vulcan Materials

, both larger by market cap. These rivals are expected to post narrower net losses and marginal revenue growth for their most recent quarters when they report in February. During the three months that ended in November, Standard & Poor's and Sterne Agee both upgraded Texas Industries. The company held its annual meeting of shareholders in October.

The long-term EPS growth forecast is about 18 percent, but the price-to-earnings (P/E) ratio is much higher than the industry average. The company's return on equity is less than two percent. Short interest is almost 20 percent of the float, the highest it has been since July. Only three of the 11 analysts surveyed by Thomson/First Call who follow the stock recommend buying shares. The current share price has overrun their mean price target, but the most optimistic price target represents almost 14 percent potential upside. The stock is up more than 97 percent from a year ago, including more than 16 percent in the past week, when it reached a multiyear. The share price is well above the 50-day and 200-day moving averages. Over the past six months, the stock has outperformed the broader markets, but underperformed Cemex. Its performance has been in line with Vulcan Materials.