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Why Is Commercial Metals (CMC) Up 3.5% Since Last Earnings Report?

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A month has gone by since the last earnings report for Commercial Metals (CMC - Free Report) . Shares have added about 3.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Commercial Metals due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Commercial Metals reported first-quarter fiscal 2021 adjusted earnings per share of 58 cents, beating the Zacks Consensus Estimate of 57 cents. The figure, however, declined 20.5% year on year.

Including one-time items, the company recorded net income of 53 cents per share in the fiscal first quarter compared with the prior-year quarter’s 69 cents.

Net sales for the reported quarter came in at $1,392 million compared with the year-ago quarter’s $1,385 million. The reported figure beat the Zacks Consensus Estimate of $1,362 million.

Cost of goods sold in the quarter was up 2.5% year over year to $1,175 million. Gross profit was down 9.2% year over year to $217 million during this period. Core EBITDA was $157 million in the fiscal first quarter compared with the year-earlier quarter’s $174 million.

Segment Performance

The North America segment generated net sales of $1,195 million in the fiscal first quarter compared with the $1,217 million recorded in the prior-year quarter. The segment registered adjusted EBITDA of $156 million compared with the prior-year quarter’s $175 million.

The Europe segment’s revenues came in at $195 million, marking a year-over-year growth of 18.2%. Adjusted EBITDA was $14 million in the fiscal first quarter compared with the year-ago quarter’s $11 million.

Financials

Commercial Metals reported cash and cash equivalents of $465 million in the fiscal first quarter compared with the $542 million recorded at the end of fiscal 2020. The company’s long-term debt came in at $1,065 million at the end of the fiscal first quarter, same as of Aug 31, 2020. Cash used in operating activities was $12 million during the fiscal first quarter compared with the prior-year quarter’s cash inflow of $146 million.

On Jan 7, the company’s board announced a quarterly dividend of 12 cents per share. This dividend will be paid on Jan 21, to shareholders of record on Feb 4, 2021.

Outlook

Commercial Metals believes the finished steel volumes for North America and Europe operations will follow seasonal trends in second-quarter fiscal 2021. Meanwhile, steel shipments and downstream products will be supported by the company’s solid construction backlog in North America. Management anticipates robust demand for merchant products, backed  by the recent trends in residential construction and industrial activities in North America and Europe. However, Commercial Metals expects the significant rise in domestic scrap costs to dent margins in its North America business in the fiscal second quarter.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month. The consensus estimate has shifted -38.61% due to these changes.

VGM Scores

At this time, Commercial Metals has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Commercial Metals has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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