Eagle Materials, Inc. (NYSE:EXP) — This diversified producer of basic building products used in residential, commercial and infrastructure construction also supplies materials used for the extraction of oil and natural gas. Last Tuesday, Standard & Poor’s Capital IQ raised their 12-month target price on EXP to $120, an increase of $5. The company is on a March fiscal year, and S&P increased their FY 2017 and FY 2018 EPS estimates by 5 cents on both to $4.25 and $5.25, respectively. This increase followed EXP stock’s December-Q EPS of $1.17, 4 cents above the Capital IQ consensus.
These estimates may prove to be modest, since S&P expects private construction spending to increase 10% annually over the next two years, and the recently passed FAST Bill should have a very positive impact on growth. Additionally, the strong dollar should have no impact on EXP stock’s growth, since the company’s products are only supplied domestically.
Following a six–month consolidation after a run from under $50 to over $85, EXP stock broke out with a high-volume break-away gap in November. A shorter-term consolidation followed from Dec. 1 until Jan. 23, when the stock exploded from the consolidation with a high-volume continuation gap from about $101.50 to $103, which propelled the stock to a new all-time high at over $110 where it flashed one of my CBR Sell signals.
However, I don’t forecast an extended decline, just a closing of the recent gap and down to support at $99 to $101. Thus, traders should attempt to buy EXP at $101 for a 90-day trade to $120 for a proposed gain of over 18%.
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