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Here's Why You Should Hold on to Commercial Metals (CMC) Now
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Commercial Metals Company (CMC - Free Report) is gaining from the demand for each of its major product lines, as well as solid contract backlog volumes and positive pricing, despite higher scrap margins on steel products and uncertainties in Europe.
The company’s shares have gained 34.3% in the past year compared to the industry’s growth of 18.2%.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for CMC’s fiscal second-quarter earnings per share is pegged at $1.50 and the same for fiscal 2023 is pegged at $7.65. The consensus estimate for the fiscal second quarter has moved 14.5% north in the past two months. In the same period, the consensus estimate for 2023 earnings has moved north by 8.9%. CMC has a trailing four-quarter average earnings surprise of 16.7%.
Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
What’s Aiding the Stock?
Commercial Metals will continue to benefit from robust demand in North America for each of its major product lines. The company’s North America solid contract backlog volumes and high average pricing are also aiding its top-line performance.
Downstream bidding activity remains strong, indicating a strong pipeline of projects entering the market. Commercial Metals is implementing price rises across its mill products in response to rapidly rising scrap costs, which will sustain margins.
Commercial Metals will benefit from the Infrastructure Investment and Jobs Act signed in November 2021, which would provide 1.2 trillion in funding over five years and stimulate an estimated 1.5 million tons of incremental annual rebar demand at full run rate.
The commissioning of the Arizona 2 micro mill, as well as the addition of Tensar's engineered solutions capabilities, will provide the company with greater flexibility to capitalize on these favorable demand conditions.
CMC also has a strong liquidity position and is using its cash strategically. Its total liquidity was $1.5 billion as of Nov 30, 2022. The company ended the first quarter of fiscal 2023 with cash and cash equivalents of $582 million. Its strong liquidity, financial position and focus on reducing debt by strategic capital allocation approach will stoke growth.
Recent acquisitions — including Roane Metals Group LLC in March 2023, and Kodiak Resources, Inc. and Kodiak Properties, L.L.C. 's Galveston area metals recycling facility and related assets in November 2022 — will strengthen the company's portfolio.
A Few Concerns
The company faces headwinds from higher scrap margins on steel products in North America and Europe. Uncertainty related to scrap prices might impact the company’s results in the near term until the situation stabilizes.
Market conditions in Europe remain uncertain, given the ongoing energy crisis and slowing industrial activity. Sanctions imposed by the European Union (EU) on imported materials from Russia and Belarus, combined with the disruption of Ukrainian supplies, are expected to tighten the supply of long steel products.
The Zacks Consensus Estimate for CalMaine Foods’ fiscal 2023 earnings per share is pegged at $16.75, suggesting 515.8% growth from the year-ago reported figure. Earnings estimates have moved 106.8% north in the past 60 days. CALM has a trailing four-quarter earnings surprise of 15.3%, on average. Its shares have gained 27.6% in the past year.
The Zacks Consensus Estimate for Reliance Steel’s earnings per share is pegged at $20.86 for 2023. Earnings estimates have been revised 16.1% upward in the past 60 days. RS has a trailing four-quarter average surprise of 13.4%, on average. The company has gained 42.3% in a year.
The Zacks Consensus Estimate for Alpha Metallurgical’s 2023 earnings per share is pegged at $46.09. Earnings estimates have moved 56.5% north in the past 60 days. AMR’s shares have gained 43% in the past year.
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Here's Why You Should Hold on to Commercial Metals (CMC) Now
Commercial Metals Company (CMC - Free Report) is gaining from the demand for each of its major product lines, as well as solid contract backlog volumes and positive pricing, despite higher scrap margins on steel products and uncertainties in Europe.
The company’s shares have gained 34.3% in the past year compared to the industry’s growth of 18.2%.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for CMC’s fiscal second-quarter earnings per share is pegged at $1.50 and the same for fiscal 2023 is pegged at $7.65. The consensus estimate for the fiscal second quarter has moved 14.5% north in the past two months. In the same period, the consensus estimate for 2023 earnings has moved north by 8.9%. CMC has a trailing four-quarter average earnings surprise of 16.7%.
Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
What’s Aiding the Stock?
Commercial Metals will continue to benefit from robust demand in North America for each of its major product lines. The company’s North America solid contract backlog volumes and high average pricing are also aiding its top-line performance.
Downstream bidding activity remains strong, indicating a strong pipeline of projects entering the market. Commercial Metals is implementing price rises across its mill products in response to rapidly rising scrap costs, which will sustain margins.
Commercial Metals will benefit from the Infrastructure Investment and Jobs Act signed in November 2021, which would provide 1.2 trillion in funding over five years and stimulate an estimated 1.5 million tons of incremental annual rebar demand at full run rate.
The commissioning of the Arizona 2 micro mill, as well as the addition of Tensar's engineered solutions capabilities, will provide the company with greater flexibility to capitalize on these favorable demand conditions.
CMC also has a strong liquidity position and is using its cash strategically. Its total liquidity was $1.5 billion as of Nov 30, 2022. The company ended the first quarter of fiscal 2023 with cash and cash equivalents of $582 million. Its strong liquidity, financial position and focus on reducing debt by strategic capital allocation approach will stoke growth.
Recent acquisitions — including Roane Metals Group LLC in March 2023, and Kodiak Resources, Inc. and Kodiak Properties, L.L.C. 's Galveston area metals recycling facility and related assets in November 2022 — will strengthen the company's portfolio.
A Few Concerns
The company faces headwinds from higher scrap margins on steel products in North America and Europe. Uncertainty related to scrap prices might impact the company’s results in the near term until the situation stabilizes.
Market conditions in Europe remain uncertain, given the ongoing energy crisis and slowing industrial activity. Sanctions imposed by the European Union (EU) on imported materials from Russia and Belarus, combined with the disruption of Ukrainian supplies, are expected to tighten the supply of long steel products.
Commercial Metals Company Price and Consensus
Commercial Metals Company price-consensus-chart | Commercial Metals Company Quote
Stocks to Consider
Some better-ranked stocks in the basic materials space are CalMaine Foods, Inc. (CALM - Free Report) , Reliance Steel & Aluminum Co. (RS - Free Report) and Alpha Metallurgical Resources (AMR - Free Report) . CALM and RS currently flaunt a Zacks Rank #1 (Strong Buy) and AMR carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CalMaine Foods’ fiscal 2023 earnings per share is pegged at $16.75, suggesting 515.8% growth from the year-ago reported figure. Earnings estimates have moved 106.8% north in the past 60 days. CALM has a trailing four-quarter earnings surprise of 15.3%, on average. Its shares have gained 27.6% in the past year.
The Zacks Consensus Estimate for Reliance Steel’s earnings per share is pegged at $20.86 for 2023. Earnings estimates have been revised 16.1% upward in the past 60 days. RS has a trailing four-quarter average surprise of 13.4%, on average. The company has gained 42.3% in a year.
The Zacks Consensus Estimate for Alpha Metallurgical’s 2023 earnings per share is pegged at $46.09. Earnings estimates have moved 56.5% north in the past 60 days. AMR’s shares have gained 43% in the past year.