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Commercial Metals (CMC) Suffers From Weak UK Market Conditions
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Commercial Metals Company’s (CMC - Free Report) results were impacted by lower steel product margins over scrap costs since the last few quarters. The company expects margins on steel products to experience further compression in the upcoming quarters. Sluggish demand in Europe is putting additional pressure on pricing and margins.
These market conditions in Europe are expected to persist and offset the gains from the robust demand in North America for each of Commercial Metals’ major product lines. Oversupply in the steel industry has also been impacting the company’s margins.
Lower Steel Product Margins Ail Performance
The company has been bearing the brunt of lower steel product margins over scrap costs in North America and Europe. It expects margins on steel products to experience further compression in the fiscal second quarter.
European Union (EU) sanctions placed on imported materials from Russia and Belarus, combined with the supply disruption of materials imported from Ukraine, are expected to tighten the supply of long steel products. This is expected to dent the company’s margin.
Weak Europe Demand Remains Worrisome
In Europe, sluggish demand put pressure on pricing and margins in the first quarter of fiscal 2024. Sentiment and activity levels in the company's construction and industrial end markets were impacted by general economic uncertainties.
In response to market imbalances, the Polish long steel industry has significantly reduced production and inventory levels. Conditions in Europe are projected to be challenging, weighing on the company's results.
Lower contract awards in the fiscal first quarter drove year-over-year decreases in the volume and value of Commercial Metals’ downstream backlog from the peak observed last year.
Demand from the industrial end markets, which is vital for merchant items, was varied, with some applications reporting less activity than in the prior-year quarter. If this persists, this will likely impact the company’s fiscal 2024 results.
Tariff on Steel Imports Act as Headwind
The 25% tariff on steel imports levied under Section 232, largely helped the U.S. steel industry. Even after the tariffs being imposed, if foreign steelmakers continue to export their steel products to the United States, it could create downward pressure on U.S. steel prices.
Excess capacity has also led to greater protectionism, as is evident in raw material and finished product border tariffs put in place by China, Brazil and other countries. Such protectionism could have a material adverse effect on Commercial Metal’s business, results of operations and financial condition.
Price Performance
CMC shares have lost 9.5% in the past year against the industry’s growth of 11.4%.
Image Source: Zacks Investment Research
Zacks Rank & Stocks to Consider
Commercial Metals currently carries a Zacks Rank #4 (Sell).
Universal Stainless & Alloy Products has an average trailing four-quarter earnings surprise of 44.4%. The Zacks Consensus Estimate for USAP’s 2023 earnings is pegged at 52 cents per share. Earnings estimates have been unchanged in the past 60 days. USAP shares rallied 140% last year.
The Zacks Consensus Estimate for Carpenter Technology’s 2024 earnings is pegged at $3.96 per share. The consensus estimate for 2024 earnings has moved 11% north in the past 60 days. It has an average trailing four-quarter earnings surprise of 14.3%. CRS shares have gained 53.7% in a year.
The Zacks Consensus Estimate for Ternium’s 2023 earnings is pegged at $7.98 per share. It has an average trailing four-quarter earnings surprise of 38.6%. TX’s shares have gained 24% in a year.
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Commercial Metals (CMC) Suffers From Weak UK Market Conditions
Commercial Metals Company’s (CMC - Free Report) results were impacted by lower steel product margins over scrap costs since the last few quarters. The company expects margins on steel products to experience further compression in the upcoming quarters. Sluggish demand in Europe is putting additional pressure on pricing and margins.
These market conditions in Europe are expected to persist and offset the gains from the robust demand in North America for each of Commercial Metals’ major product lines. Oversupply in the steel industry has also been impacting the company’s margins.
Lower Steel Product Margins Ail Performance
The company has been bearing the brunt of lower steel product margins over scrap costs in North America and Europe. It expects margins on steel products to experience further compression in the fiscal second quarter.
European Union (EU) sanctions placed on imported materials from Russia and Belarus, combined with the supply disruption of materials imported from Ukraine, are expected to tighten the supply of long steel products. This is expected to dent the company’s margin.
Weak Europe Demand Remains Worrisome
In Europe, sluggish demand put pressure on pricing and margins in the first quarter of fiscal 2024. Sentiment and activity levels in the company's construction and industrial end markets were impacted by general economic uncertainties.
In response to market imbalances, the Polish long steel industry has significantly reduced production and inventory levels. Conditions in Europe are projected to be challenging, weighing on the company's results.
Lower contract awards in the fiscal first quarter drove year-over-year decreases in the volume and value of Commercial Metals’ downstream backlog from the peak observed last year.
Demand from the industrial end markets, which is vital for merchant items, was varied, with some applications reporting less activity than in the prior-year quarter. If this persists, this will likely impact the company’s fiscal 2024 results.
Tariff on Steel Imports Act as Headwind
The 25% tariff on steel imports levied under Section 232, largely helped the U.S. steel industry. Even after the tariffs being imposed, if foreign steelmakers continue to export their steel products to the United States, it could create downward pressure on U.S. steel prices.
Excess capacity has also led to greater protectionism, as is evident in raw material and finished product border tariffs put in place by China, Brazil and other countries. Such protectionism could have a material adverse effect on Commercial Metal’s business, results of operations and financial condition.
Price Performance
CMC shares have lost 9.5% in the past year against the industry’s growth of 11.4%.
Image Source: Zacks Investment Research
Zacks Rank & Stocks to Consider
Commercial Metals currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks from the basic materials space are Universal Stainless & Alloy Products, Inc. (USAP - Free Report) , Carpenter Technology Corporation (CRS - Free Report) and Ternium S.A. (TX - Free Report) . USAP and CRS sport a Zacks Rank #1 (Strong Buy), and TX carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Universal Stainless & Alloy Products has an average trailing four-quarter earnings surprise of 44.4%. The Zacks Consensus Estimate for USAP’s 2023 earnings is pegged at 52 cents per share. Earnings estimates have been unchanged in the past 60 days. USAP shares rallied 140% last year.
The Zacks Consensus Estimate for Carpenter Technology’s 2024 earnings is pegged at $3.96 per share. The consensus estimate for 2024 earnings has moved 11% north in the past 60 days. It has an average trailing four-quarter earnings surprise of 14.3%. CRS shares have gained 53.7% in a year.
The Zacks Consensus Estimate for Ternium’s 2023 earnings is pegged at $7.98 per share. It has an average trailing four-quarter earnings surprise of 38.6%. TX’s shares have gained 24% in a year.