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Commercial Metals (CMC) Down 1.9% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Commercial Metals (CMC - Free Report) . Shares have lost about 1.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Commercial Metals due for a breakout? 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 Q1 Earnings Meet Estimates, Sales Declines Y/Y

Commercial Metals reported adjusted earnings per share (EPS) of 78 cents for first-quarter fiscal 2025, in line with the Zacks Consensus Estimate. The company’s earnings fell 47.7% from the prior-year quarter’s $1.49.

In the first quarter of fiscal 2024, CMC made an adjustment of $11.6 million for mill operational commissioning costs. CMC has decided that from the periods commencing after Feb. 29, 2024, it will no longer include any adjustment for mill operational commissioning costs. Accordingly, Commercial Metals recast adjusted earnings for the prior-year quarter to $1.49. Including the adjustment, it previously stood at $1.63.

Counting one-time items, CMC reported a loss of $1.54 in first-quarter fiscal 2025 against the prior-year quarter’s EPS of $1.49.

Commercial Metals’ net sales in the reported quarter were $1.91 billion, down 4.7% from the year-ago quarter’s $2 billion. The reported figure surpassed the Zacks Consensus Estimate of $1.89 billion.

The cost of goods sold in the quarter was down 0.1% from the year-ago quarter to $1.6 billion. The gross profit was down 22.8% from the year-ago quarter to roughly $308 million during this period. The core EBITDA was $211 million in the fiscal first quarter, down 32.8% from the year-ago quarter.

Q1 Segmental Performance

The North America Steel Group segment generated net sales of $1.52 billion in the fiscal first quarter compared with $1.59 billion in the prior-year quarter. The segment registered an adjusted EBITDA of around $188 million compared with the year-earlier quarter’s $267 million. 

The Europe Steel Group segment’s sales were $209 million, down 7% from the year-ago quarter. The adjusted EBITDA was $25.8 million in the fiscal first quarter compared with the year-ago quarter’s $38.9 million. 

The Emerging Businesses Group segment generated net sales of around $169 million in the fiscal first quarter compared with $177 million in the prior-year quarter. The segment registered an adjusted EBITDA of $22.7 million compared with the year-earlier quarter’s $30.9 million.

Q1 Cash Flow & Balance Sheet Updates

Commercial Metals reported cash and cash equivalents of roughly $856 million at the end of first-quarter fiscal 2025 compared with $858 million at the end of fiscal 2024. CMC’s long-term debt was $1.15 billion at the end of the first quarter of fiscal 2025, flat with the end of fiscal 2024. Cash generated from operating activities was roughly $213 million in the quarter compared with $261 million in the prior-year quarter.

CMC repurchased shares worth $50.4 million in the quarter under review. As of Nov 30, 2024, $353.4 million were under the current share buyback authorization.

FY25 Outlook

The company expects second-quarter fiscal 2025 consolidated financial results to decline sequentially. 

In the North America Steel Group segment, finished steel shipments are expected to follow normal seasonal trends in the fiscal second quarter. However, the adjusted EBITDA margin is expected to decline from that reported in the fiscal first quarter due to lower margins over scrap costs on steel and downstream products.

Europe Steel Group’s adjusted EBITDA is anticipated to be in line with last year's comparable quarter. Emerging Businesses Group’s results are likely to bear the brunt of seasonality.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -42.93% due to these changes.

VGM Scores

Currently, Commercial Metals has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise 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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