The surge in global infrastructural development and construction activities has strengthened the demand for building materials within both commercial and residential sectors. Consequently, this trend lays the groundwork for the building materials industry to experience substantial growth in the near future.
Given this backdrop, let us explore building material stocks CRH plc (CRH), Heidelberg Materials AG (HDELY), and CEMEX, S.A.B. de C.V. (CX), which could be wise portfolio additions this summer.
The global markets have been contending with a multitude of shock factors like the geopolitical crisis and macroeconomic headwinds. Despite this, the infrastructure industry, although not completely immune, is anticipated to remain buoyed.
The Bipartisan Infrastructure Law is projected to boost the nation’s infrastructure and competitiveness and till now has announced over $220 billion in funding for activities such as rebuilding roads and bridges, replacing lead pipes to provide clean water, cleaning up legacy pollution, and ushering in a new era of clean energy.
Moreover, privately‐owned housing completions in the United States for May 2023 increased 9.5% from April 2023 and 5% year-over-year, indicating an uptick in construction activities. Consequently, the building materials industry is poised to thrive and maintain momentum.
On top of it, according to the U.S. Department of Commerce, the global need for infrastructure of all types will grow between 2010 and 2030 to reach more than $53 trillion.
Furthermore, given the burgeoning development of smart cities, the necessity for construction materials is forecasted to escalate in the future. This surge is anticipated to act as a catalyst, fueling substantial growth within the market. The global construction materials market size is estimated to surge to $1.73 trillion by 2030, exhibiting a CAGR of 3.9%.
Given this backdrop, fundamentally strong building materials stocks CRH, HDELY, and CX could be wise buys this summer.
CRH plc (CRH)
CRH is a building materials company based in Dublin, Ireland. The company operates through three segments: Americas Materials; Europe Materials; and Building Products.
On June 30, CRH announced its completion of the latest share buyback program phase, returning $0.7 billion of cash to shareholders. Between March 31, 2023, and June 29, 2023, 14.2 million ordinary shares were repurchased on Euronext Dublin and the London Stock Exchange.
This brings the total cash returned to shareholders under CRH’s ongoing share buyback program to $5 billion since its commencement in May 2018.
A dividend of $1.03 per ordinary share was paid to the shareholders on May 2, 2023. Its annual dividend of $2.06 translates to a 3.70% dividend yield on the current price level. Its four-year average dividend yield is 2.58%. Its dividends have grown at 11.8% and 9.6% CAGRs over the past three and five years, respectively.
CRH’s trailing-12-month cash from operations of $3.95 billion is significantly above the industry average of $357.30 million. Its trailing-12-month ROCE, ROTC, and ROTA of 12.68%, 7.38%, and 8.51% are 18.7%, 21.3%, and 81.8% higher than industry averages of 10.68%, 6.08%, and 4.68%, respectively.
For the fiscal year that ended December 31, 2022, CRH’s revenue increased by 12% year-over-year to $32.72 billion, while its gross profit increased 10.4% year-over-year to $10.88 billion. During the same period, the group’s EBITDA and operating profit from continuing operations increased by 12.5% and 16.9% year-over-year to $5.62 billion and $3.89 billion, respectively.
CRH’s profit for the financial year increased by 47.8% year-over-year to $3.87 billion. The company’s earnings per ordinary share from continuing operations came in at $3.48, up 14.9% year-over-year.
For the fiscal first quarter ending March 31, 2023, CRH’s Americas material solution sales were 10% above the previous-year quarter, driven by robust pricing, which offset the impact of unfavorable weather on activity levels in certain markets.
Americas building solutions sales for the fiscal first quarter were 22% ahead of the same period in 2022, reflecting good pricing progress, resilient underlying demand, the positive contribution from prior-year acquisitions, and the continued delivery of CRH’s integrated solutions strategy.
Analysts expect CRH’s revenue for the fiscal year ending December 2023 to increase 4.1% year-over-year to come in at $33.82 billion, while its EPS is expected to come in at $3.55.
CRH’s stock has gained 59.7% over the past year and 36.2% over the past six months to close the last trading session at $55.88. The stock is trading above its 50-day and 200-day moving averages of $50.13 and $44.13, respectively, indicating an uptrend.
CRH’s POWR Ratings reflect a promising outlook. The company has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
CRH has an A grade for Momentum and a B for Value, Stability, and Sentiment. It is ranked #5 in the A-rated 47-stock Industrial – Building Materials industry.
To see additional ratings for CRH (Growth and Quality), click here.
Heidelberg Materials AG (HDELY)
Headquartered in Heidelberg, Germany, HDELY is a cement company that produces and distributes cement, aggregates, ready-mixed concrete, and asphalt worldwide.
HDELY pays an annual dividend of $0.57, which translates to a 3.53% dividend yield on the current price level. Its four-year average dividend yield is 3.24%. Its dividends have grown at 60.9% and 4.8% CAGRs over the past three and five years, respectively.
HDELY’s trailing-12-month cash from operation of $2.59 billion is 625.3% higher than the industry average of $357.30 million. Its trailing-12-month gross profit margin and net income margin of 58.96% and 7.54% are 107.7% and 5.9% higher than industry averages of 28.39% and 7.12%, respectively.
HDELY’s revenue increased 10.6% year-over-year to €4.90 billion ($5.33 billion) during the fiscal first quarter that ended March 31, 2023. Its operating EBITDA for the quarter increased 41.4% year-over-year to €557 million ($606.61 million), while operating EBIT amounted to €258 million ($280.98 million), up 183.5% year-over-year.
HDELY’s revenue and EPS are expected to increase 2.7% and 8.8% year-over-year to $23.48 billion and $1.88, respectively, for the fiscal year ending December 2023.
The stock has gained 69.9% over the past year to close the last trading session at $16.36. Over the past six months, the stock has gained 38.2%. The stock is trading above its 50-day and 200-day moving averages of $15.30 and $12.52, respectively.
HDELY’s strong fundamentals are evident in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
HDELY has an A grade for Momentum and a B for Value and Stability. It is ranked #4 within the same industry.
In addition to the POWR Ratings highlighted above, one can see HDELY’s ratings for Growth, Sentiment, and Quality here.
CEMEX, S.A.B. de C.V. (CX)
Based in Mexico, CX produces, distributes, and sells cement, ready-mix concrete, aggregates, clinker, and other construction materials worldwide. The company provides building solutions for housing projects, pavement projects, green building consultancy services, cement trade maritime services, and information technology solutions.
On June 29, it was announced that CX’s circular waste management business Regenera was expanding its operations in Mexico, with the opening of a new facility in partnership with leading waste collection company PASA. The partnership between Regenera and PASA would support the central Mexican city of Puebla’s efforts to become a zero-waste city.
On June 27, it was declared that the European Union had awarded CX and WtEnergy Advanced Solutions a €4.4 million ($4.80 million) grant for the implementation of a novel waste-to-fuel technology utilizing synthetic gas at its Alicante cement plant in Spain. The project has been cataloged as “the first of its kind” for the cement industry by the European Union.
CX’ trailing-12-month gross profit margin of 30.71% is 8.2% above the industry average of 28.39%. Its trailing-12-month levered FCF margin of 4.97% is 39.9% higher than the industry average of 3.55%.
For its fiscal first quarter that ended March 31, 2023, CX’s net sales increased 8.3% year-over-year to $4.04 billion. Its gross profit stood at $1.29 billion, up 12.3% year-over-year, while operating EBITDA was $733 million for the quarter, indicating a 7% rise from the prior-year quarter.
CX’s operation in the United States reported record EBITDA with a growth of 15%, despite significant weather challenges impacting most markets.
CEO of CX, Fernando A. González, said, “I believe this quarter marks an important inflection point in our mission to recover 2021 margins and compensate for the steep cost inflation we’ve experienced over the past two years. Importantly, our pipeline of growth investments and our Urbanization Solutions business were a significant contributor to EBITDA growth.”
Analysts expect CX’s revenue and EPS to grow 11.2% and 5.6% year-over-year to $4.40 billion and $0.19, respectively, for the fiscal third quarter ending September 2023. Moreover, CX topped consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 83.4% to close its last trading session at $7.08. It has also gained 71.8% over the past six months. The stock is trading above its 50-day and 200-day moving averages of $6.54 and $5.04, respectively.
It’s no surprise that CX has an overall A rating, which equates to a Strong Buy in the POWR Ratings system.
It has an A grade for Momentum and a B for Growth and Value. CX is ranked #7 within the same industry.
Click here to see the additional ratings for CX’s Stability, Sentiment, and Quality.
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CRH shares were trading at $55.88 per share on Tuesday morning, up $0.15 (+0.27%). Year-to-date, CRH has gained 43.49%, versus a 16.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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