Nothing Abstract About Concrete
February 14, 2008
By Greg Sushinsky
Some traders are great at making super-fast plays on esoteric
industries, some of
which may not even have products and earnings yet. Others like to
wait a bit and see how things shape up, then decide to jump in, while
still others like to trade large cap or mid-cap stocks when there’s
some big news, with either a surge or a sharp drop in price. Then
there are some long-term buy-and-hold investors for whom the
dullest of companies in the dullest of industries, companies who
make something so tangible you can go see it, touch it, feel it, and
for whom such earnings and growth prospects are nearly as tangible.
Some of the basic industries fit that description, and one such
company is Texas Industries, Inc. (NYSE: TXI), in the concrete
business, with markets for its universally used product spread
across the southwest from Arkansas to California. Texas Industries
makes gray portland cement, specialty cements, aggregates, and
other related building products for the construction industry.
Nothing fancy there. It is a major supplier in the geographical areas
it serves, and part of its strategies include supplying to areas that
build year-round. The company attempts to keep a strong presence
in these areas by selling related products such as mortar, sand,
crushed gravel, masonry cements, white portland cement, and oil
well cements. It also produces some consumer packaged products,
such as a ready-mix cement.
Texas Industries has a market cap of $1.5B, and in 2007 had
revenue of just under $1B, which produced a net income of $109
million. Its last twelve month earnings were $3.28 per share, though
for the full year ending May, 2008, it projects only $3.13 EPS due to
the slowdown in construction that has already taken place in the
economy. The stock price has punished for this, as it has traded in
a 45.38-93.80 range but has recently been in the low and mid-50s.
Texas Industries, as a construction industry participant, is both
the beneficiary and the victim of the leading edges of where
spending goes, or doesn’t go, for major construction projects. With
the housing downturn nationwide, and especially in one of its main
markets, California, Texas Industries bore the brunt of this lessened
spending. Going forward, however, analyst projections peg 2009
earnings at a much healthier $5 or more per share, yet even if that
increase is sliced to a much more conservative number, you can see
that the revenue/income increase should be substantial.
Not to forget, Texas Industries does substantial business in other
southwest markets not nearly so affected as California, and cement
is hardly limited in its use to homebuilding. Offices, business and
retail business, as well as road paving are all construction segments
that rely heavily on the use of cement. Also, with a nation’s
infrastructure in need of constant renewal, you can find substantial
amounts of concrete usage for bridge repair and similar projects.
Furthermore, as economic stimulus, lower interest rates and credit
improvement and availability works its way through the economy, as
well as the expected upturn in business and industrial spending,
Texas Industries is poised to benefit from this impending recovery.
A long term five and ten year chart on this stock shows substantial
growth in the stock price, and as the market recovers, this long-term
trend should continue.
February 14, 2008
By Greg Sushinsky
Some traders are great at making super-fast plays on esoteric
industries, some of
which may not even have products and earnings yet. Others like to
wait a bit and see how things shape up, then decide to jump in, while
still others like to trade large cap or mid-cap stocks when there’s
some big news, with either a surge or a sharp drop in price. Then
there are some long-term buy-and-hold investors for whom the
dullest of companies in the dullest of industries, companies who
make something so tangible you can go see it, touch it, feel it, and
for whom such earnings and growth prospects are nearly as tangible.
Some of the basic industries fit that description, and one such
company is Texas Industries, Inc. (NYSE: TXI), in the concrete
business, with markets for its universally used product spread
across the southwest from Arkansas to California. Texas Industries
makes gray portland cement, specialty cements, aggregates, and
other related building products for the construction industry.
Nothing fancy there. It is a major supplier in the geographical areas
it serves, and part of its strategies include supplying to areas that
build year-round. The company attempts to keep a strong presence
in these areas by selling related products such as mortar, sand,
crushed gravel, masonry cements, white portland cement, and oil
well cements. It also produces some consumer packaged products,
such as a ready-mix cement.
Texas Industries has a market cap of $1.5B, and in 2007 had
revenue of just under $1B, which produced a net income of $109
million. Its last twelve month earnings were $3.28 per share, though
for the full year ending May, 2008, it projects only $3.13 EPS due to
the slowdown in construction that has already taken place in the
economy. The stock price has punished for this, as it has traded in
a 45.38-93.80 range but has recently been in the low and mid-50s.
Texas Industries, as a construction industry participant, is both
the beneficiary and the victim of the leading edges of where
spending goes, or doesn’t go, for major construction projects. With
the housing downturn nationwide, and especially in one of its main
markets, California, Texas Industries bore the brunt of this lessened
spending. Going forward, however, analyst projections peg 2009
earnings at a much healthier $5 or more per share, yet even if that
increase is sliced to a much more conservative number, you can see
that the revenue/income increase should be substantial.
Not to forget, Texas Industries does substantial business in other
southwest markets not nearly so affected as California, and cement
is hardly limited in its use to homebuilding. Offices, business and
retail business, as well as road paving are all construction segments
that rely heavily on the use of cement. Also, with a nation’s
infrastructure in need of constant renewal, you can find substantial
amounts of concrete usage for bridge repair and similar projects.
Furthermore, as economic stimulus, lower interest rates and credit
improvement and availability works its way through the economy, as
well as the expected upturn in business and industrial spending,
Texas Industries is poised to benefit from this impending recovery.
A long term five and ten year chart on this stock shows substantial
growth in the stock price, and as the market recovers, this long-term
trend should continue.
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| Financial Articles by Greg Sushinsky |
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