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Here's Why Commercial Metals (CMC) is an Attractive Bet Now
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Commercial Metals Company (CMC - Free Report) looks attractive at the moment, aided by solid finished steel demand stemming from robust construction and infrastructure activities and higher steel prices. The company’s Europe segment is benefiting from solid growth in the Polish construction market while new contract wins and strong construction backlog continue to support the North America segment. The company’s network optimization efforts and ramping up of new steel mills will continue to drive growth.
Factors Detailing
Positive Earnings Surprise History: Commercial Metals, a Zacks Rank #1 (Strong Buy) stock, has a trailing four-quarter earnings surprise of 15.9%, on average.
Positive Growth Expectations: The company’s earnings estimate for fiscal 2022 is pegged at $8.75, suggesting year-over-year growth of around 147.8%.
Strong Financials: The company’s strong liquidity, financial position and focus on reducing debt by a strategic capital allocation approach will stoke growth. The company’s net debt to trailing 12-month adjusted EBITDA ratio is pegged at 0.5 at the end of the fiscal second quarter, while net debt to capitalization is just 14%. This further underscores the company's ability to meet debt obligations. It had total liquidity of $1.5 billion at the end of the fiscal second quarter.
Price Performance: The company’s shares have gained 12.4% in the past year against the industry’s decline of 10.4%.
Image Source: Zacks Investment Research
Growth Drivers
Commercial Metals will continue to benefit from robust finished steel demand across most of its product lines, supported by its growing downstream backlog and solid levels of new construction work entering the project pipeline. Solid highway infrastructure activities and healthy construction markets in North America are driving strong rebar and wire rods demand.
Demand conditions within Central Europe remain strong. The Polish construction market continues to grow, while consumption of merchant and wire rod products is supported by expanding manufacturing activity in Poland. The company believes that seasonal factors, new contract wins, strong construction backlog in North America and strength across the key end markets in North America and Europe will continue supporting the solid steel shipment volumes in third-quarter fiscal 2022.
CMC will benefit from higher steel prices, thanks to demand upsurge in major end-use markets and tight supply conditions partly due to the Russia-Ukraine conflict and hefty Section 232 tariffs on steel imports.
Commercial Metals continue to gain from its network optimization efforts, generating additional margin and reducing costs in the near future. The company is progressing with constructing a third micro mill Arizona 2, which will be the world's first mill to produce merchant bar quality (MBQ) steel products. The new mill will provide the company with 400 thousand tons of rebar capacity to serve incremental infrastructure demand and about 150 thousand tons of merchant bar. The company ramped up the construction of its fourth new micro mill, MM4, which will enhance its position in the Eastern United States and boost its ability to serve markets in the Northeast, Mid-Atlantic and Midwest. Both MM4 and Arizona projects will receive 1.2 trillion in funding over the five years under the Infrastructure Investment and Jobs Act signed last November.
Other Stocks to Consider
Some other top-ranked stocks in the basic materials space are Allegheny Technologies Inc. (ATI - Free Report) , Nutrien Ltd. (NTR - Free Report) and Albemarle Corporation (ALB - Free Report) .
Allegheny has a projected earnings growth rate of 869.2% for the current year. The Zacks Consensus Estimate for ATI's current-year earnings has been revised 27.3% upward in the past 60 days.
Allegheny’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 128.9%, on average. ATI has gained around 15.6% in a year and currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Nutrien has a projected earnings growth rate of 163.2% for the current year. The Zacks Consensus Estimate for NTR’s current-year earnings has been revised 27.5% upward in the past 60 days.
Nutrien’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, the average being 5.8%. NTR has gained 42.9% in a year. The company flaunts a Zacks Rank #1.
Albemarle has a projected earnings growth rate of 203.7% for the current year. The Zacks Consensus Estimate for ALB’s current-year earnings has been revised 100.4% upward in the past 60 days.
Albemarle’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 22.5%. ALB has gained 46.5% in a year. The company flaunts a Zacks Rank #1.
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Here's Why Commercial Metals (CMC) is an Attractive Bet Now
Commercial Metals Company (CMC - Free Report) looks attractive at the moment, aided by solid finished steel demand stemming from robust construction and infrastructure activities and higher steel prices. The company’s Europe segment is benefiting from solid growth in the Polish construction market while new contract wins and strong construction backlog continue to support the North America segment. The company’s network optimization efforts and ramping up of new steel mills will continue to drive growth.
Factors Detailing
Positive Earnings Surprise History: Commercial Metals, a Zacks Rank #1 (Strong Buy) stock, has a trailing four-quarter earnings surprise of 15.9%, on average.
Positive Growth Expectations: The company’s earnings estimate for fiscal 2022 is pegged at $8.75, suggesting year-over-year growth of around 147.8%.
Strong Financials: The company’s strong liquidity, financial position and focus on reducing debt by a strategic capital allocation approach will stoke growth. The company’s net debt to trailing 12-month adjusted EBITDA ratio is pegged at 0.5 at the end of the fiscal second quarter, while net debt to capitalization is just 14%. This further underscores the company's ability to meet debt obligations. It had total liquidity of $1.5 billion at the end of the fiscal second quarter.
Price Performance: The company’s shares have gained 12.4% in the past year against the industry’s decline of 10.4%.
Image Source: Zacks Investment Research
Growth Drivers
Commercial Metals will continue to benefit from robust finished steel demand across most of its product lines, supported by its growing downstream backlog and solid levels of new construction work entering the project pipeline. Solid highway infrastructure activities and healthy construction markets in North America are driving strong rebar and wire rods demand.
Demand conditions within Central Europe remain strong. The Polish construction market continues to grow, while consumption of merchant and wire rod products is supported by expanding manufacturing activity in Poland. The company believes that seasonal factors, new contract wins, strong construction backlog in North America and strength across the key end markets in North America and Europe will continue supporting the solid steel shipment volumes in third-quarter fiscal 2022.
CMC will benefit from higher steel prices, thanks to demand upsurge in major end-use markets and tight supply conditions partly due to the Russia-Ukraine conflict and hefty Section 232 tariffs on steel imports.
Commercial Metals continue to gain from its network optimization efforts, generating additional margin and reducing costs in the near future. The company is progressing with constructing a third micro mill Arizona 2, which will be the world's first mill to produce merchant bar quality (MBQ) steel products. The new mill will provide the company with 400 thousand tons of rebar capacity to serve incremental infrastructure demand and about 150 thousand tons of merchant bar. The company ramped up the construction of its fourth new micro mill, MM4, which will enhance its position in the Eastern United States and boost its ability to serve markets in the Northeast, Mid-Atlantic and Midwest. Both MM4 and Arizona projects will receive 1.2 trillion in funding over the five years under the Infrastructure Investment and Jobs Act signed last November.
Other Stocks to Consider
Some other top-ranked stocks in the basic materials space are Allegheny Technologies Inc. (ATI - Free Report) , Nutrien Ltd. (NTR - Free Report) and Albemarle Corporation (ALB - Free Report) .
Allegheny has a projected earnings growth rate of 869.2% for the current year. The Zacks Consensus Estimate for ATI's current-year earnings has been revised 27.3% upward in the past 60 days.
Allegheny’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 128.9%, on average. ATI has gained around 15.6% in a year and currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Nutrien has a projected earnings growth rate of 163.2% for the current year. The Zacks Consensus Estimate for NTR’s current-year earnings has been revised 27.5% upward in the past 60 days.
Nutrien’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, the average being 5.8%. NTR has gained 42.9% in a year. The company flaunts a Zacks Rank #1.
Albemarle has a projected earnings growth rate of 203.7% for the current year. The Zacks Consensus Estimate for ALB’s current-year earnings has been revised 100.4% upward in the past 60 days.
Albemarle’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 22.5%. ALB has gained 46.5% in a year. The company flaunts a Zacks Rank #1.