Eagle Materials Capitalizes On Strong Cement Pricing Despite Wallboard Slowdown: Analyst

Truist Securities analyst Keith Hughes reiterated a Buy rating on Eagle Materials Inc EXP, raising the price target to $220 from $195.

The company recently reported financial results for the first quarter of fiscal 2024, where revenues rose 7% Y/Y to $601.5 million.

The analyst notes that results continue to be favorable as cement pricing remains strong and wallboard results are slowing much less than expected.

Hughes believes the bottom of the wallboard will come in the next two to three quarters. However, no substantial contraction in earnings during this period is estimated.

Heavy demand levels are continuing to be observed in many EXP markets, which is projected to continue as spending continues to ramp up from the infrastructure bill. 

The analyst noted that every plant in the company's network remains in near sold-out conditions and that they are seeing increased public demand across the footprint.

The analyst notes that the company also announced double-digit pricing increases in about half their cement markets as of the beginning of 3Q. 

The pricing actions also illustrate the continued strong demand of fundamentals for the Eagle Heavy Materials markets from the infrastructure side.

However, management noted that it was mainly the western markets that did not see these mid-year pricing increases as they were dealing with a late start to the construction season and pressures these geographies, the analyst adds.

On the negative side, weaker housing starts affecting the wallboard business at a bit of a lag, which has delivered a 4% volume decline during Q1.

Hughes expects the volume declines to accelerate, but the worse case is not materializing.

Price Action: EXP shares are trading higher by 0.55% to $183.35 on the last check Monday.