We recently published a list of 11 Best Cement and Construction Materials Stocks to Buy Now. In this article, we are going to take a look at where Eagle Materials Inc. (NYSE:EXP) stands against other best cement and construction materials stock.
Tailwinds for the Construction Materials Sector
The construction materials sector is expected to benefit from the residential construction activity while a chronic supply of homes penetrates the US. The extent of the shortage is concerning with some estimating it to range between 2 to 8 million housing units. This has sent home prices soaring over the past decade. As the mortgage rates fell in September with the Fed signaling rate cuts, the US home builder sentiment inclined after witnessing four months of continuous declines.
The Federal Reserve’s first 0.5 percentage point rate cut was welcomed by construction executives who regarded it as a move likely to foster real estate investment and construction activity. Analysts see a positive aspect on the supply side of the housing market as they believe that the rate cut will ease out financing conditions for homebuilders and get them building again. Taking into account the news that officials have pointed to another rate cut before the year’s end, the builder sentiment can highly improve which will favor the building materials sector by driving demand for input materials.
Furthermore, the Infrastructure Investment and Jobs Act (IIJA) which was signed into law in November 2021 is still in action. Considering the fact that significant funding to the asphalt and road paving industry comes from the US government, the beneficiaries in this scenario are construction materials companies. Three years into the 5-year $1.2 trillion act, only 40% of funds from the infrastructure law have been allocated to projects. White House data analyzed by CNBC unveiled that the biggest chunk of IIJA money was flowing to road and bridge construction. IIJA will be extending the support for construction projects beyond the initial five-year period since much of the funds will stay available until they’re used up. Therefore, federally funded projects supported by the IIJA are a positive sign for the construction materials businesses.
Our Methodology:
In order to compile a list of the 11 best cement and construction materials stocks to buy now, we first use a stock screener to make an extended list of 20 relevant companies with the highest market caps. Moving on, we shortlisted the top 11 stocks from our list which had the highest number of hedge fund holders. The 11 best cement and construction materials stocks to buy now have been ranked in ascending order of the number of hedge fund holders, as of Q2 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Eagle Materials Inc. (EXP): Leader in Best Cement and Construction Materials Stock
A close-up of limestone being mined from a quarry.
Eagle Materials Inc. (NYSE:EXP) is a manufacturer of basic construction materials used in residential, commercial, industrial, infrastructure, and energy applications. It has two primary lines, Portland Cement and Gypsum Wallboard, which are used for building and repairing roads and highways as well as for building and renovating commercial, residential, and industrial structures. The company manufactures and sells its products through a network of over 70 facilities across the US. It is headquartered in Dallas, Texas.
Eagle Materials owns virtually all its raw material and has relative self-sufficiency with decades of supply located close to its production facilities. Conditions are favorable with cement being the essential binding material in concrete with few substitutes and the water molecule imbedded in gypsum wallboard chemistry with an inherent fire resistance benefit essential to satisfy US construction specifications. To expand its heavy materials footprint, Eagle Materials has taken strategic initiatives such as the $430 million Mountain Cement plant expansion and modernization and a new Houston slag-cement facility through its joint venture at Texas Lehigh Cement.
For the first quarter of fiscal 2025 ended June 30, Eagle Materials Inc. (NYSE:EXP) had a record revenue of $608.7 million and record net earnings per diluted share of $3.94. Although the weather conditions were adverse across many of the core markets, Eagle’s portfolio of businesses performed well. While cement demand continues to be driven by construction spending on infrastructure and heavy industrial projects, residential construction activity is resilient due to housing supply shortages.
With favorable underlying fundamentals in markets and significant cash flow generation, Eagle Materials Inc. (NYSE:EXP) is positioned well to perform through the remaining fiscal year. The company has driven competitiveness and strong returns through sustained investment for low-cost positioning through cycles.
Overall, EXP ranks 5th on our list of Best Cement and Construction Materials Stocks to Buy Now. While we acknowledge the potential of EXP as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than EXP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
