On Wednesday, RBC Capital adjusted its stance on CEMEX (NYSE:CX), downgrading the company's stock from Sector Perform to Underperform and reducing the price target to $5 from the previous $6.
The stock currently trades at $5.73, and according to InvestingPro analysis, CEMEX appears undervalued despite generating $17.25 billion in revenue over the last twelve months.
The revision comes amid concerns about potential challenges for the Mexico-based cement giant, particularly in light of the recent election results in the United States.
The analyst at RBC Capital provided a rationale for the downgrade, citing the significant portion of Mexico's exports that go to the U.S. and the risk posed by the newly elected U.S. President's stance on trade.
With approximately 80% of Mexico's exports destined for the U.S., the possibility of a 25% import tariff could have serious implications for CEMEX and the broader Mexican economy. InvestingPro data shows CEMEX maintains a FAIR financial health score, with a beta of 1.14 indicating moderate market sensitivity.
The economic stakes are high, as Bloomberg's analysis indicates that nearly 11% of Mexico's GDP could be jeopardized by the proposed tariffs. In the previous year, Mexico's exports of goods and services to the U.S. totaled $493.1 billion, while U.S. foreign direct investment in Mexico amounted to $130.3 billion.
While it remains uncertain whether the tariffs will be implemented, the analyst emphasized the looming uncertainty over the level of inward investment.
This uncertainty is expected to persist until the renegotiation of the USMCA, the free trade agreement between the U.S., Mexico, and Canada, set to be concluded in 2026.
Despite these challenges, InvestingPro reveals that CEMEX remains profitable, with additional insights available in the comprehensive Pro Research Report.
In other recent news, CEMEX SAB de CV, a leading global building materials company, announced the third installment of its 2024 cash dividend, totaling $30 million.
This follows the company's successful sale of its operations in the Philippines, a transaction amounting to approximately $800 million. Additionally, CEMEX reported a trustee change for its CPO Trust with Banco Citi México assuming the role, ensuring no impact on operations.
In their recent Third Quarter 2024 Conference Call, CEMEX highlighted robust growth and resilience amid divestitures and weather challenges, resulting in over a 200% year-over-year boost in net income. Analysts from Thompson Davis and Goldman Sachs have shown interest in CEMEX's strategic focus and resilience.
These recent developments underline the dynamic nature of CEMEX's operations. Note that all these are recent developments and do not predict the future of the company.
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