Cemex SAB de CV (ADR) (CX): Cement Your Position in This Stock

Martin Marietta is the second-largest domestic construction-aggregates producer. Its top-five revenue contributing states, Texas, North Carolina, Iowa, Georgia and South Carolina, accounted for more than half of its turnover. It has targeted San Antonio and Colorado for its geographic expansion plans, with the aim of being among the top-two market players in these two places.

In addition to its core business of the quarrying of stone, sand and gravel, it also derived about 11% of its fiscal 2012 revenue from specialty products such as magnesia-based chemicals and dolomitic lime. Its specialty products segment registered record profitability in the first quarter of fiscal 2013, on the back of increased capacity from its new kiln in Woodville, Ohio. It is the only stock among the three with a yield of any significance at 1.5%, backed by a solid 10-year profitability and a positive free cash flow track record.

Vulcan Materials is the largest producer of construction aggregates in the U.S. Its key advantage lies in its geographical location of its quarries, which allow it to meet demand for aggregates in markets with limited reserves. It has more than 300 facilities located in 18 of the top 25 most densely populated areas in the country.

Refinancing is not an issue for Vulcan Materials, as it has sufficient liquidity, with close to $190 million of cash and $500 million of un-drawn credit lines, to meet the maturing of about $300 million of debt over the next three years. Vulcan Materials cut its annual dividend from $0.76 per share in fiscal 2011 to $0.04 per share in 2012, but expressed its intention to restore dividends to a more meaningful level during its fourth-quarter fiscal 2012 earnings conference call.

While management did not indicate any timeline for the lifting of its dividend, I am optimistic, given Vulcan Materials’ continued positive free cash flow generation for the trailing-12 months, and a manageable gearing below 70%.

Conclusion

Most of the times, the best company might not be the best investment. If everyone knows a stock is a quality company, it is usually priced to perfection with no opportunity for share price upside. Cemex SAB de CV (ADR) (NYSE:CX) remains the best way to play the recovery of global infrastructure demand, given its geographical scope. In addition, it should see its share price re-rate upwards, as the market rewards it for its reduced credit risk with the gradual strengthening of the balance sheet.

The article Cement Your Position in This Stock originally appeared on Fool.com and is written by Mark Lin.

Mark Lin has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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