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Commercial Metals Company (CMC - Free Report) , a Zacks Rank #1 (Strong Buy), has broken out to the upside after bucking last year’s downtrend. Gracefully sidestepping last year’s bear market, the stock has hit a series of 52-week highs this year on increasing volume. Shares continue to display relative strength as buying pressure accumulates in this market leader.
CMC sports the highest Zacks Value Style Score of ‘A’, indicating further upside based on favorable valuation metrics. The company is part of the Zacks Steel – Producers industry group, which ranks in the top 7% out of more than 250 Zacks Ranked Industries. This group has widely outperformed the market to kick off the new year:
Image Source: Zacks Investment Research
Despite the impressive performance, this industry group remains relatively undervalued:
Image Source: Zacks Investment Research
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
Commercial Metals Company manufactures, recycles, and fabricates steel and metal products and related materials globally. The company processes and sells ferrous and nonferrous scrap metals to steel mills and foundries, aluminum and alloy manufacturers, and copper refineries. CNC also provides fabricated steel products used to reinforce concrete in the construction of commercial buildings, hospitals, convention centers, stadiums, bridges, highways, and industrial plants.
Steel demand is expected to pick up aided by the automotive sector, as well as increased investment spending under the Infrastructure Investment and Jobs Act. A strong pipeline of projects entering the market and a robust backlog are tailwinds for fiscal 2023.
Earnings Trends and Future Estimates
CMC has built up an impressive earnings history, surpassing earnings estimates in each of the last four quarters. In January, the company reported fiscal Q1 EPS of $2.24/share, a 12.56% surprise over the $1.99 consensus estimate. CMC has delivered a trailing four-quarter average earnings surprise of 16.71%.
The CMC growth engine is expected to remain hot this year, as analysts covering the metals processing company have increased their EPS estimates across the board. Fiscal second-quarter estimates have been raised by +24.43% in the past 60 days. The Q2 Zacks Consensus EPS Estimate now stands at $1.63/share, reflecting potential growth of 6.54% relative to the same quarter in the prior year.
Image Source: Zacks Investment Research
Let’s Get Technical
CMC shares have advanced nearly 70% in the past year. Only stocks that are in extremely powerful uptrends were able to weather last year’s bear market so gracefully. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.
Image Source: StockCharts
Notice how both the 50-day (blue line) and 200-day (red line) moving averages are sloping up. The stock has been making a series of higher highs. With both strong fundamentals and technicals, CMC is poised to continue its outperformance.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Commercial Metals has recently witnessed positive revisions. As long as this trend remains intact (and CMC continues to deliver earnings beats), the stock will likely continue its bullish run this year. CMC currently trades relatively undervalued at just a 7.44 forward P/E.
Bottom Line
Solid institutional buying should continue to provide a tailwind for the stock price. CMC is ranked favorably by our Style Score Categories, with an ‘A’ for Value and ‘B’ for Growth, paving the way for an overall ‘A’ VGM score. Increasing volume at recent breakout levels is another bullish sign.
Robust fundamentals combined with a strong technical trend certainly justify adding shares to the mix. Backed by a leading industry group and robust history of earnings beats, it’s not difficult to see why this company is a compelling investment. Investors would be wise to consider CMC as a portfolio candidate if they haven’t already done so.
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Bull of the Day: Commercial Metals Co. (CMC)
Commercial Metals Company (CMC - Free Report) , a Zacks Rank #1 (Strong Buy), has broken out to the upside after bucking last year’s downtrend. Gracefully sidestepping last year’s bear market, the stock has hit a series of 52-week highs this year on increasing volume. Shares continue to display relative strength as buying pressure accumulates in this market leader.
CMC sports the highest Zacks Value Style Score of ‘A’, indicating further upside based on favorable valuation metrics. The company is part of the Zacks Steel – Producers industry group, which ranks in the top 7% out of more than 250 Zacks Ranked Industries. This group has widely outperformed the market to kick off the new year:
Image Source: Zacks Investment Research
Despite the impressive performance, this industry group remains relatively undervalued:
Image Source: Zacks Investment Research
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
Commercial Metals Company manufactures, recycles, and fabricates steel and metal products and related materials globally. The company processes and sells ferrous and nonferrous scrap metals to steel mills and foundries, aluminum and alloy manufacturers, and copper refineries. CNC also provides fabricated steel products used to reinforce concrete in the construction of commercial buildings, hospitals, convention centers, stadiums, bridges, highways, and industrial plants.
Steel demand is expected to pick up aided by the automotive sector, as well as increased investment spending under the Infrastructure Investment and Jobs Act. A strong pipeline of projects entering the market and a robust backlog are tailwinds for fiscal 2023.
Earnings Trends and Future Estimates
CMC has built up an impressive earnings history, surpassing earnings estimates in each of the last four quarters. In January, the company reported fiscal Q1 EPS of $2.24/share, a 12.56% surprise over the $1.99 consensus estimate. CMC has delivered a trailing four-quarter average earnings surprise of 16.71%.
The CMC growth engine is expected to remain hot this year, as analysts covering the metals processing company have increased their EPS estimates across the board. Fiscal second-quarter estimates have been raised by +24.43% in the past 60 days. The Q2 Zacks Consensus EPS Estimate now stands at $1.63/share, reflecting potential growth of 6.54% relative to the same quarter in the prior year.
Image Source: Zacks Investment Research
Let’s Get Technical
CMC shares have advanced nearly 70% in the past year. Only stocks that are in extremely powerful uptrends were able to weather last year’s bear market so gracefully. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.
Image Source: StockCharts
Notice how both the 50-day (blue line) and 200-day (red line) moving averages are sloping up. The stock has been making a series of higher highs. With both strong fundamentals and technicals, CMC is poised to continue its outperformance.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Commercial Metals has recently witnessed positive revisions. As long as this trend remains intact (and CMC continues to deliver earnings beats), the stock will likely continue its bullish run this year. CMC currently trades relatively undervalued at just a 7.44 forward P/E.
Bottom Line
Solid institutional buying should continue to provide a tailwind for the stock price. CMC is ranked favorably by our Style Score Categories, with an ‘A’ for Value and ‘B’ for Growth, paving the way for an overall ‘A’ VGM score. Increasing volume at recent breakout levels is another bullish sign.
Robust fundamentals combined with a strong technical trend certainly justify adding shares to the mix. Backed by a leading industry group and robust history of earnings beats, it’s not difficult to see why this company is a compelling investment. Investors would be wise to consider CMC as a portfolio candidate if they haven’t already done so.