Morningstar | LafargeHolcim Shares Rise 3% After Solid 2Q; Shares Look Undervalued. See Updated Analyst Note from 29 Jul 2018
After a slow start to 2018, LafargeHolcim saw better results during the second quarter. For the quarter, like-for-like revenue growth was 6.2% and recurring EBITDA growth was 1.5% compared with the prior year, as the company shook off declines from the first quarter. Most regions saw improvement with the exception of Middle East Africa, where like-for-like EBITDA declined a massive 36% over the prior-year quarter. Challenging market conditions are likely to weigh on the region at least in the near term.After the turnaround in the second quarter, the company maintained its full-year outlook for 3% to 5% like-for-like revenue growth and 5% like-for-like recurring EBITDA growth. We think the company will likely hit its revenue target but expect the company to fall slightly short of its EBITDA target.
We're largely maintaining our forecast, so we're maintaining our fair value estimate of CHF 60 per share for narrow-moat LafargeHolcim. Year-to-date, LafargeHolcim shares have traded down from nearly CHF 60 per share down to CHF 50 per share. Although the company had a slow first quarter, we don't think there were any material changes to the long-term outlook to drive such a significant decline in the share price. We think shares are undervalued and see attractive risk-adjusted upside.
For more details on our country-by-country cement demand forecast, please see our Basic Materials Observer "Global Cement Outlook."
LafargeHolcim is a producer of cement and aggregates. Co. also supplies ready-mix concrete, concrete products, asphalt and a range of services. Co. operates through three segments: cement, aggregates, and other construction materials and services. Co.'s cement segment provides a range of cementitious materials and also develops customized blends for special applications. Through its aggregates segment, Co. produces aggregates which include crushed stone, gravel and sand mainly used in the manufacture of ready-mix concrete, concrete products and asphalt, as well as for road building and railway tracks, with production centered on quarrying, preparing and sorting the raw material.
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