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Why Is Commercial Metals (CMC) Up 6.5% Since Last Earnings Report?

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It has been about a month since the last earnings report for Commercial Metals (CMC - Free Report) . Shares have added about 6.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Commercial Metals due for a pullback? 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 drivers.

Commercial Metals Q4 Earnings Beat, Revenues Miss

Commercial Metals reported fourth-quarter 2019 adjusted earnings per share of 76 cents, beating the Zacks Consensus Estimate of 70 cents. The figure also surged 49% year over year.

Including one-time items, the company reported net income of 72 cents per share during the fourth quarter compared with the prior-year quarter’s 43 cents.

Net sales for the reported quarter surged 18% year over year to $1,543 million. However, the reported figure missed the Zacks Consensus Estimate of $1,569 million.

Cost of goods sold in the reported quarter improved around 15% year over year to roughly $1,290 million. Gross profit surged 38% year over year to $253 million in the quarter. Core EBITDA was $1596 million in the fiscal fourth quarter compared with the year-ago quarter’s $124 million.

Financials

Commercial Metals exited fiscal 2019 with cash and cash equivalents of $192.5 million compared with $622.5 million at the end of fiscal 2018. The company’s long-term debt increased to $1,227 million at the end of fiscal 2019 from $1,139 million recorded as of the end of fiscal 2018. Cash flow from operating activities were $37 million during the fiscal 2019 compared with cash usage of $434 million in the prior fiscal.

Fiscal 2019 Performance

Adjusted earnings per share in fiscal 2019 improved 40% year over year to $2.08, which surpassed the Zacks Consensus Estimate of $2.02. Including one-time items, the company reported earnings per share of $1.67 in fiscal 2019 compared with $1.14 in fiscal 2018.

Net sales in fiscal 2019 grew 26% year over year to $5.83 billion. However, the reported figure missed the Zacks Consensus Estimate of $5.88 billion.

Outlook

Backed by a solid fabrication backlog, current positive rebar margin environment and momentum in the Polish operations, the company expects improved results in fiscal 2020.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted -7.18% due to these changes.

VGM Scores

Currently, Commercial Metals has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Commercial Metals has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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