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Does Eagle Materials (EXP) Face Short-Term Headwinds?

Soumya Eswaran
·4-min read

L1 Capital, an investment management firm, released its “L1 Capital International Fund” second quarter 2024 investor letter. A copy of the letter can be downloaded here. A copy of the letter can be downloaded here. In the June quarter, the fund returned -3.0% (net of fees) compared to 0.3% return for the Benchmark (all in Australian dollars). The Australian dollar appreciated 1.8% against the U.S. dollar in the quarter and 2.7% against the Euro, decreasing the Fund and Benchmark Australian dollar reported quarterly returns. The Fund returned 22.2% (net of fees) outperforming the Benchmark return of 19.8% (all in Australian dollars) for the year ended 30 June 2024. The Australian dollar appreciated 0.3% against the U.S. dollar and 2.0% against the Euro, thus currency had a limited impact on Australian dollar returns of the Fund and Benchmark over the past 12 months. Please check the fund’s top five holdings to know its best picks in 2024.

L1 Capital International Fund highlighted stocks like Eagle Materials Inc. (NYSE:EXP), in the second quarter 2024 investor letter. Eagle Materials Inc. (NYSE:EXP) is a heavy construction material and light building materials supplier.  The one-month return of Eagle Materials Inc. (NYSE:EXP) was -7.34%, and its shares gained 15.76% of their value over the last 52 weeks. On July 9, 2024, Eagle Materials Inc. (NYSE:EXP) stock closed at $212.39 per share with a market capitalization of $7.191 billion.

L1 Capital International Fund stated the following regarding Eagle Materials Inc. (NYSE:EXP) in its Q2 2024 investor letter:

"Three companies detracted from the Fund’s performance by more than 0.5% – CRH, Eagle Materials Inc. (NYSE:EXP) and Mastercard.

In our view, measuring the performance of investments over short time horizons such as three months is meaningless. While CRH and Eagle Materials detracted from the Fund’s returns this quarter, they were both leading positive contributors in the prior quarter. Since Inception of the Fund over 5 years ago, both companies have been top ten contributors to the Fund’s returns.

Recently, there has been some negative data that is causing a sell-off in the share price of CRH and Eagle Materials. Both these companies supply building products to the infrastructure, residential and commercial construction sectors. CRH has around 75% exposure to North America, with the remainder principally Europe (CRH has also recently acquired the majority of Adbri in Australia). Eagle Materials solely operates in the U.S.

Demand from the U.S. infrastructure sector is likely to remain robust for the medium term due to increased Federal and State spending, supported by the $1.2 trillion Infrastructure Investment and Jobs Act. Short term activity has been disrupted by bad weather – we think this is complete noise and is just slightly delaying projects, although CRH and Eagle Materials’ June 2024 quarterly results will likely be impacted..." (Click here to read the full text)

A construction site with a truck and crane unloading the company's materials.

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Eagle Materials Inc. (NYSE:EXP) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 30 hedge fund portfolios held Eagle Materials Inc. (NYSE:EXP) at the end of the first quarter which was 26 in the previous quarter. While we acknowledge the potential of Eagle Materials Inc. (NYSE:EXP) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

We discussed Eagle Materials Inc. (NYSE:EXP) in another article and shared ClearBridge Small Cap Value Strategy's views on the company in the previous quarter. Eagle Materials Inc. (NYSE:EXP) is included in Seth Klarman's top stock picks from Q1 2024. In addition, please check out our hedge fund investor letters Q2 2024 page for more investor letters from hedge funds and other leading investors.

READ NEXT: Michael Burry Is Selling These Stocks and A New Dawn Is Coming to US Stocks.

Disclosure: None. This article is originally published at Insider Monkey.