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Commercial Metals (CMC) Q1 Earnings Miss Estimates, Up Y/Y

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Commercial Metals Company (CMC - Free Report) delivered adjusted net income of $42 million or 35 cents per share in the first quarter of fiscal 2019 (ended Nov 30, 2018), lagging the Zacks Consensus Estimate of 38 cents. However, the figure was higher than the year-ago quarter’s net income of $36 million or 31 cents. Notably, the company’s shipments were affected in the quarter by historically wet weather in the United States.
 
Including one-time items, the company reported net income of $19 million or 16 cents per share in the reported quarter compared with $32 million or 27 cents per share in the prior-year quarter.
 
Net sales of $1,277 million for the quarter rose 19% year over year, surpassing the Zacks Consensus Estimate of $1,265 million.

Commercial Metals Company Price, Consensus and EPS Surprise

 
Commercial Metals Company Price, Consensus and EPS Surprise

Commercial Metals Company price-consensus-eps-surprise-chart | Commercial Metals Company Quote

Cost of goods sold in the reported quarter rose around 20% year over year to roughly $1,118 million. Gross profit rose 11% year over year to $159 million in the reported quarter. Adjusted operating profit in the quarter was $42 million, down 11% from $47 million in the prior-year quarter. Core EBITDA was $98 million in the first quarter compared with $93 million in the prior-year quarter.

Financials
 
Commercial Metals exited first quarter of fiscal 2019 with cash and cash equivalents of $52 million compared with $622 million at the end of fiscal 2018. The company’s long-term debt rose to $1,307 million at the end of the quarter from $1,139 million as of fiscal 2018 end. Cash used in operating activities were $357 million at the end of the reported quarter compared with $120 million in the prior year quarter.
 
On Jan 2, the company’s board of directors declared a quarterly dividend of 12 cents per share. The dividend will be paid on Jan 30 to shareholders of record on Jan 15, 2019.
 
On Nov 5, the company completed the acquisition of certain U.S. rebar steel mill and fabrication assets from Gerdau S.A., a producer of long and specialty steel products in the Americas for a cash purchase price of $600 million. The buyout includes 33 rebar fabrication facilities in the United States as well as steel mills located in Knoxville, TN; Jacksonville, FL; Sayreville, NJ and Rancho Cucamonga, CA, with annual melt capacity of 2.7 million tons. The company’s global melt capacity will now go up to approximately 7.2 million tons. Commercial Metals will have an expanded geographic presence in the largest construction regions in the United States.
 
Outlook
 
Demand in the company’s key markets remains strong which in turn will drive results. However, the company cautions that the second quarter of fiscal 2019 results will include normal seasonality, which will reduce shipment rates at its facilities. Nevertheless, the quarter will deliver improved results compared with prior second performances aided by the company’s strategic growth initiatives. Further, the company will gain on the back of continued growth from its investment in the new Durant, OK micro mill, and growth from the ongoing integration of the newly acquired rebar assets from Gerdau S.A.
 
Price Performance
 
 
Shares of Commercial Metals have fallen 36% in the last year compared with the industry’s decline of 31%.
 
Zacks Rank & Stocks to Consider
 
Commercial Metals currently carries a Zacks Rank #3 (Hold).
 
A few better-ranked stocks in the basic materials space are Verso Corporation (VRS - Free Report) , Ingevity Corporation (NGVT - Free Report) and Cameco Corporation (CCJ - Free Report) . While Verso and Ingevity sport a Zacks Rank #1 (Strong Buy), Cameco carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
 
Verso has an expected earnings growth rate of 63.5% for 2019. The company’s shares have rallied 37% in the past year.
 
Ingevity has an expected earnings growth rate of 21.5% for 2019. The company’s shares have gained 16% in the past year.  
 
Cameco has an expected earnings growth rate of 20% for 2019. Its shares have moved up 23% in a year’s time.
 
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