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Commercial Metals (CMC) Hits 52-Week High: What's Driving It?

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Commercial Metals Company (CMC - Free Report) scaled a fresh 52-week high of $32.43 during the Mar 29 trading session, before retracting to close at $31.02. Forecast-topping earnings results in second-quarter fiscal 2021, solid steel demand from robust construction and infrastructure activities as well as higher steel prices have contributed to this price appreciation.

Recently, the company reported second-quarter fiscal 2021 adjusted earnings per share of 66 cents, beating the Zacks Consensus Estimate of 61 cents. The figure increased 24.5% year on year. Commercial Metals has a trailing four-quarter average earnings surprise of 38.08%.

Share Price Performance

The company’s shares have gained 96.5% in the past year compared with the industry’s growth of 158.3%.

Driving Factors

Commercial Metals projects solid demand for steel products in fiscal 2021, triggered by the elevated spending in the residential and construction sectors in North America, continued recovery in the manufacturing sector, and solid highway infrastructure activities. These factors are driving steel prices higher. Moreover, the company believes the finished steel volumes for North America and Europe operations will follow strong seasonal trends in third-quarter fiscal 2021 owing to the commencement of the spring and summer construction seasons.

Solid construction backlog in North America will support shipments of finished steel products and downstream products in the near term. Volumes in Europe are anticipated to be healthy on the increasing demand from the construction and industrial end markets. These are spurring demand for merchant and wire rod products in the Central European markets. Apart from this, manufacturing activities in Poland and Germany have been expanding since last July. These factors position the company well for near-term growth.

Commercial Metals continues to gain from its ongoing network optimization efforts, which will yield additional margin and reduce costs in the near future. Apart from this, the company is implementing price rise across its mill products in response to the rapidly-rising scrap costs. Management anticipates that its capacity-curtailment initiative at the West Coast fabrication facility to support the company’s network-optimization efforts will provide cost benefits in the days to come. This January, the company closed its Steel California operations and transitioned the supply chain for the California market to lower-cost material produced in the Central and East regions. Management expects to realize cost benefits from this mill closure during the fiscal third quarter. Furthermore, the company’s solid liquidity, financial position and focus on reducing debt will stoke growth.

Zacks Rank & Other Stocks to Consider

Commercial Metals currently carries a Zacks Rank #2 (Buy).

Other top-ranked stocks in the basic materials space include Impala Platinum Holdings Limited (IMPUY - Free Report) , Fortescue Metals Group Limited (FSUGY - Free Report) and Ashland Global Holdings Inc. (ASH - Free Report) , all sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Impala Platinum has an expected earnings growth rate of 195.9% for the current fiscal year. The company’s shares have surged 84% in the past year.

Fortescue has a projected earnings growth rate of 84.3% for the current fiscal year. The company’s shares have soared 182% in a year’s time.

Ashland has an estimated earnings growth rate of 83.9% for the current fiscal year. The company’s shares have appreciated 109.2% over the past year.

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