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Can Commercial Metals' TAG Program Drive Margin Expansion?
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Key Takeaways
Commercial Metals' TAG program targets $150M annualized EBITDA benefit by FY26.
CMC saw 1Q26 margin gains from scrap optimization, yield gains and reduced leakage.
Commercial Metals expects TAG to drive lasting margin transformation beyond FY27.
Commercial Metals Company’s (CMC - Free Report) Transform, Advance, Grow (TAG) Program focuses on driving higher through-the-cycle margins, earnings, cash flows and ROIC. CMC expects an annualized EBITDA benefit of $150 million in fiscal 2026 from the program.
Launched in 2024, the TAG program aims to drive consistency across all areas of the business. The program is designed to optimize logistics, reduce input consumption, lower costs and boost energy efficiency. The program includes more than 150 individual projects across all the company’s business segments and support functions. The program has already aided improvements in melt shops and rolling mills that have resulted in production of higher volumes of product while maintaining the same levels of energy and raw material consumption.
Commercial Metals is gaining from continued success in optimizing scrap, improving yield and cost mix. CMC maintained a solid momentum in the program in the first fiscal quarter, with the latest initiatives aimed at margin expansion and full value realization for the company’s industry-leading service.
For fiscal 2027 and beyond, the company expects the TAG program to yield significant and lasting transformation on its margin profile. Benefits from the TAG program, along with strong market dynamics and effective operational execution, will generate momentum in CMC's existing businesses.
Growth Strategies by Commercial Metals’ Peers
Cleveland-Cliffs Inc. (CLF - Free Report) is executing significant cost-reduction initiatives, with lowering steel unit costs $150 per ton in three years. The company reduced overhead and fixed costs, along with optimizing its integrated footprint and improving efficiencies. Cleveland-Cliffs expects further cost reduction in 2026. It expects to gain from Stelco’s low-cost structure and asset optimization.
Steel Dynamics, Inc. (STLD - Free Report) is providing innovative alternative metal solutions to its customers, employing its expertise in operating highly efficient, low-cost melting, casting and rolling facilities. The company is developing a lower-carbon facility that offers an energy-efficient alternative to traditional production. This facility is expected to diversify and enhance Steel Dynamics' high-margin, value-added product portfolio.
CMC’s Price Performance, Valuations & Estimates
Commercial Metals shares have gained 51.3% in the past year compared with the industry’s 50.1% growth. In comparison, the Zacks Basic Materials sector and the S&P 500 have returned 47.2% and 15.3%, respectively.
Image Source: Zacks Investment Research
Commercial Metals is currently trading at a forward price/sales ratio of 0.96 compared with the industry's 1.77.
Image Source: Zacks Investment Research
Cleveland-Cliffs is a cheaper option, trading at a forward price/sales ratio of 0.29, while Steel Dynamics is trading at a higher 1.37, respectively.
The Zacks Consensus Estimate for Commercial Metals’ fiscal 2026 sales is $8.89 billion, indicating a 13.9% year-over-year jump. The consensus mark for the year’s earnings is pegged at $7.34 per share, indicating a year-over-year upsurge of 134.5%.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for fiscal 2027 sales implies 5.7% year-over-year growth. The same for earnings suggests a dip of 1.6%.
EPS estimates for fiscal 2026 and 2027 have moved north over the past 60 days.
View the Zacks #1 Rank List
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Can Commercial Metals' TAG Program Drive Margin Expansion?
Key Takeaways
Commercial Metals Company’s (CMC - Free Report) Transform, Advance, Grow (TAG) Program focuses on driving higher through-the-cycle margins, earnings, cash flows and ROIC. CMC expects an annualized EBITDA benefit of $150 million in fiscal 2026 from the program.
Launched in 2024, the TAG program aims to drive consistency across all areas of the business. The program is designed to optimize logistics, reduce input consumption, lower costs and boost energy efficiency. The program includes more than 150 individual projects across all the company’s business segments and support functions. The program has already aided improvements in melt shops and rolling mills that have resulted in production of higher volumes of product while maintaining the same levels of energy and raw material consumption.
Commercial Metals is gaining from continued success in optimizing scrap, improving yield and cost mix. CMC maintained a solid momentum in the program in the first fiscal quarter, with the latest initiatives aimed at margin expansion and full value realization for the company’s industry-leading service.
For fiscal 2027 and beyond, the company expects the TAG program to yield significant and lasting transformation on its margin profile. Benefits from the TAG program, along with strong market dynamics and effective operational execution, will generate momentum in CMC's existing businesses.
Growth Strategies by Commercial Metals’ Peers
Cleveland-Cliffs Inc. (CLF - Free Report) is executing significant cost-reduction initiatives, with lowering steel unit costs $150 per ton in three years. The company reduced overhead and fixed costs, along with optimizing its integrated footprint and improving efficiencies. Cleveland-Cliffs expects further cost reduction in 2026. It expects to gain from Stelco’s low-cost structure and
asset optimization.
Steel Dynamics, Inc. (STLD - Free Report) is providing innovative alternative metal solutions to its customers, employing its expertise in operating highly efficient, low-cost melting, casting and rolling facilities. The company is developing a lower-carbon facility that offers an energy-efficient alternative to traditional production. This facility is expected to diversify and enhance Steel Dynamics' high-margin, value-added product portfolio.
CMC’s Price Performance, Valuations & Estimates
Commercial Metals shares have gained 51.3% in the past year compared with the industry’s 50.1% growth. In comparison, the Zacks Basic Materials sector and the S&P 500 have returned 47.2% and 15.3%, respectively.
Commercial Metals is currently trading at a forward price/sales ratio of 0.96 compared with the industry's 1.77.
Cleveland-Cliffs is a cheaper option, trading at a forward price/sales ratio of 0.29, while Steel Dynamics is trading at a higher 1.37, respectively.
The Zacks Consensus Estimate for Commercial Metals’ fiscal 2026 sales is $8.89 billion, indicating a 13.9% year-over-year jump. The consensus mark for the year’s earnings is pegged at $7.34 per share, indicating a year-over-year upsurge of 134.5%.
The Zacks Consensus Estimate for fiscal 2027 sales implies 5.7% year-over-year growth. The same for earnings suggests a dip of 1.6%.
EPS estimates for fiscal 2026 and 2027 have moved north over the past 60 days.
Image Source: Zacks Investment Research
CMC currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.