) reported its fiscal 2014 second quarter results, consensus
estimates have fallen for both this year and next. It is a Zacks
Rank #5 (Strong Sell) stock.
Shares of Texas Industries do not look cheap at 78x forward
earnings. Although the company may be a buyout target, investors
should consider waiting for the company's earnings momentum to
improve before buying the stock.
Texas Industries, Inc. supplies cement, aggregate and consumer
product building materials for all types of construction. Its
primary markets are Texas and California.
Second Quarter Results
Texas Industries reported its fiscal 2014 second quarter results on
January 8. Adjusted earnings per share came in at -35 cents,
missing the Zacks Consensus Estimate of -22 cents. It was the
company's second straight earnings miss.
Net sales rose 25% to $208.9 million, but this was well below the
consensus of $222.0 million. The company cited a number of
"non-recurring and short-term factors"
that negatively impacted its results, including
"[a]bnormal periods of inclement weather in Texas"
The company reported top-line growth in each segment (Cement,
Aggregate and Concrete), but operating income fell -39% in
Falling the Q2 miss, analysts revised their estimates lower for
both 2014 and 2015. This sent the stock to a Zacks Rank #5 (Strong
The 2014 Zacks Consensus Estimate is now -$0.44, down from $-0.30
just 30 days ago. The 2015 consensus is currently $1.59, down from
$1.65 over the same period.
In fact, falling estimates can be seen throughout the 'Building -
Cement, Concrete, Aggregate' industry. It ranks 236 out of 265
industries based on earnings momentum, according to the Zacks
Industry Rank. That puts it in the bottom 11%.
Shares of Texas Industries trade at a lofty 78x 12-month forward
earnings, well above its historical forward multiple of 13x. One
reason for this premium is because it was reported that the company
is considering a sale. This news sent shares soaring.
The Bottom Line
Considering the industry headwinds and its premium valuation,
investors should wait for earnings momentum to improve before
buying Texas Industries.
Todd Bunton, CFA is the Growth & Income Stock Strategist
and Editor of the
Income Plus Investor service
TEXAS INDS (TXI): Free Stock Analysis Report
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