Eagle Materials, Inc. (EXP), USG Corporation (USG): Ride The Housing Recovery with These 3 Picks

Eagle Materials, Inc. (NYSE:EXP), James Hardie Industries plc (ADR) (NYSE:JHX), and USG Corporation (NYSE:USG) are leaders in producing cement and wallboard materials (Eagle Materials, Inc. (NYSE:EXP)), fiber cement siding (James Hardie Industries plc (ADR) (NYSE:JHX)), and gypsum materials and interior ceiling products (USG Corporation (NYSE:USG)). These companies serve a number of industries, including residential and commercial construction, home repair and remodeling, and infrastructure.

Eagle Materials, Inc. (NYSE:EXP) operates in four major segments: cement (38% of revenue), gypsum wallboard (39%), recycled paperboard (15%), and concrete and aggregates (8%).  The company recently recorded an increase in revenue of $147.6 million, or nearly 30% from the prior year, to $642.6 million. The company should benefit from strong demand in cement and sand from construction, infrastructure improvements, and large oil and gas projects as well as general increase in demand for construction and repair materials.

In 2012, Eagle Materials, Inc. (NYSE:EXP) announced its intent to acquire two cement plants and related facilities from Lafarge N.A., boosting its cement production by 60%. The acquisition cost of $446 million for $178 million in annual sales is expensive, but assuming a 15% operating margin (the operating margin of the cement division) this gives a price to operating income of 16.7. Currently, Eagle Materials, Inc. (NYSE:EXP) trades at 26.7 trailing operating income, so this deal should be a positive for shareholders.