The U.S. is in desperate need for infrastructure upgrades.
In fact, according to the American Society of Civil Engineers, which gave U.S. infrastructure a grade of C-, the country needs $2.6 trillion in funding over the next decade.
Worse, the ASCE says that, “growing wear and tear on our nation’s roads has left 43% of our public roadways in poor or mediocre condition.” They added that 42% of all 617,000 bridges across the U.S. are at least 50 years old, with many structurally deficient.
Or look at drinking water issues.
According to the ASCE, “Our nation’s drinking water infrastructure system is made up of 2.2 million miles of underground pipes that deliver safe, reliable water to millions of people. Unfortunately, the system is aging and underfunded… There is a water main break every two minutes and an estimated 6 billion gallons of treated water lost each day.”
I could easily go on, but you get the point.
While both sides of the aisle argue about how to pay for an infrastructure upgrade, or even what to include in a bill, all we know is we’re in desperate need of repair.
With that being said, some of the biggest beneficiaries of a building boom are cement companies. “With the U.S. cement industry at 90% production capacity 30% import capacity, prices would be pressured materially higher,” says Carlos De Alba, equity analyst and head of Morgan Stanley’s Americas Basic Materials research team, as quoted by Virtual Strategy.
Some of the top cement stocks you may want to consider include:
Cement Stocks for Infrastructure: Vulcan Materials (VMC)
The last time I weighed in on Vulcan Materials, the stock traded around $108.
That was on June 11, 2020.
Today, VMC stock is up to $176, where it’s been consolidating for the last several weeks. From here, I’d like to see the stock retest a prior high of about $194, which is possible if we can get an infrastructure bill through Congress.
Vulcan also just announced it’s acquiring U.S. Concrete (NASDAQ:USCR) in a $1.294 billion deal, which could help strengthen Vulcan’s footprint in Texas, New York and New Jersey.
Better, Vulcan Materials’ earnings are impressive. Total revenues for example came in at $1.068 billion in the first quarter from $1.049 billion year-over-year. Gross profit improved to $229.3 million from $201.7 million. Net earnings jumped to $161.7 million from $60 million.
Analysts seem to like the stock here, too. Morgan Stanley analyst Courtney Yakavonis raised the firm’s target price on VMC to $186 from $185. Jefferies analyst Philip Ng upgraded the stock to a buy rating with a $207 price target.
Eagle Materials (EXP)
Another cement stock to keep an eye on is Eagle Materials, which manufactures basic construction materials, with applications in residential, commercial, industrial, infrastructure and energy. Since bottoming out around $42 in March of last year, the stock soared to a high of about $151 before pulling back to $133.50 support.
From here, I’d like to see the EXP stock retest its prior high of $151, as we near a potential infrastructure bill. Analysts seem to like this stock, as well.
For example, Jefferies analyst Philip Ng upgraded EXP to a buy from hold with a $170 target. Loop Capital analyst Garik Shmois raised his price to $170 from $145 with a buy rating. DA Davidson analyst Brent Thielman raised his target to $150 from $120. JP Morgan analyst Adrian Huerta also raised his target to $160 from $130, believing that an infrastructure bill could send Eagle Materials up another 15% to 20% from here, as noted by TheFly.com.
Cement Stocks for Infrastructure: Cemex (CX)
A third cement stock to consider is Cemex (CX), one of the biggest building materials companies in the world.
Since bottoming out around $1.63 during March 2020, the stock has exploded to a recent high of $8.22 after bouncing from double bottom support. From here, I’d like to see it break well above double top resistance around $9.09.
Analysts like this one, too. Morgan Stanley analyst Nikolaj Lippmann raised his price target to $12 from $11. Berenberg analyst Harry Goad raised his target to $11 from $10 with a buy rating. JP Morgan analyst Adrian Huerta raised his target to $11.50 from $10 with a buy rating.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999.
