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What's in the Offing for Commercial Metals' (CMC) Q4 Earnings?

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Commercial Metals Company (CMC - Free Report) is scheduled to report fourth-quarter fiscal 2019 results on Oct 23, before the opening bell.

Which Way are the Estimates Headed?

The Zacks Consensus Estimate for the fiscal fourth-quarter revenues suggests growth of 20% to $1.57 billion. The Zacks Consensus Estimate for earnings per share is pegged at 71 cents for the quarter, suggesting 39.2% jump from the year-ago quarter.

Fiscal Q3 Performance

In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate, while revenues missed the same. Both top and bottom lines improved year over year. The company surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average positive surprise being 8.27%.
Let’s see how things are shaping up prior to this announcement.

Key Factors to Consider

Spending on construction activity in the United States continues to increase. Leading indicators of macro-economic and market conditions in the United States and Poland suggest continued economic growth, which will likely translate into improved demand for steel. Conducive markets in Poland and Commercial Metals’ investment in the country poise it well. These factors are likely to have contributed to the company’s fiscal fourth-quarter performance.

The Zacks Consensus Estimate for the Americas Recycling segment’s revenues is pegged at $266 million, suggesting a decline of 26.3% from the year-ago quarter. The segment is expected to report operating profit of $2.21 million, 87% lower than the prior-year quarter’s figure of $17 million.

For the Americas Mills segment revenues, the Zacks Consensus Estimate is pinned at $853 million, projecting 41.2% year-on-year growth from the prior-year quarter’s $604 million. The segment’s operating profit is projected at $144 million, indicating an improvement of 34.5% from the $107 million reported in the prior-year quarter. Benefits from the acquisition of certain U.S. rebar steel mill and fabrication assets from Gerdau S.A, production of spooled material at the Arizona micro mill and strong rebar demand at the micro mill in Durant, OK will likely have aided the company’s to-be-reported quarter’s results.

The Americas Fabrication segment is anticipated to report revenues of $609 million in the quarter to be reported, indicating a 50.7% jump from the $404 million recorded in fourth-quarter fiscal 2018. However, the segment is expected to report an operating loss of $21.8 million compared with the prior-year quarter’s loss of $24.6 million.

The Zacks Consensus Estimate for the International Mill segment’s revenues is currently pegged at $200 million for the fiscal fourth quarter, suggesting a decline of 21% from the prior-year quarter. The Zacks Consensus Estimate for the segment’s operating income is $11.9 million for the quarter, indicating a slump of 67.3% from the year-ago reported figure.

Nevertheless, inflationary pressures on manufacturing costs due to a tight labor market, and consumable raw-material prices are expected to have dented the company’s margins in the quarter. Furthermore, its debt to equity ratio has gone up to fund the acquisition of certain U.S. rebar steel mill and fabrication assets from Gerdau S.A. Consequently, the company’s margins in the to-be-reported quarter are expected to reflect the negative impact of higher interest expense.

Commercial Metals Company Price and EPS Surprise

Earnings Whispers

Our proven model doesn’t conclusively predict an earnings beat for Commercial Metals this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Commercial Metals is -3.55%. This is because currently the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 68 cents and 71 cents, respectively.
Zacks Rank: Commercial Metals currently carries a Zacks Rank of 3.

Commercial Metals’ shares have gained 1.7% in the past year, as against the industry’s decline of 29.2%.

Stocks Worth a Look

Here are few Basic Materials stocks which you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:
Franco-Nevada Corporation (FNV - Free Report) has an Earnings ESP of +6.15% and currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Barrick Gold Corporation (GOLD - Free Report) has an Earnings ESP of +1.89% and carries a Zacks Rank of 3, at present.

Iamgold Corporation (IAG - Free Report) has an Earnings ESP of +50.00% and carries a Zacks Rank #3, currently.

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