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Commercial Metals Hits 52-Week High: Is Further Upside Left?

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Shares of Commercial Metals Company (CMC - Free Report) scaled a fresh 52-week high of $21.59 during trading session on Nov 26, before retracing a bit to close at $21.50.

The company has a market cap of $2.47 billion. It has an expected long-term earnings per share growth rate of 3.80%. Commercial Metals surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average positive beat being 5.76%.

Notably, the stock has gained 10.3% in a year’s time, as against the industry’s loss of 14.8%.

Driving Factors

Commercial Metals’ fourth-quarter fiscal 2019 adjusted earnings per share of 76 cents outpaced the Zacks Consensus Estimate of 70 cents, surging 49% year over year. The company is poised to gain from robust key end markets, acquisitions and growth in the United States and Poland.

Spending in U.S. construction activity continues to flare up, which will further translate into improved long-product steel demand. Robust markets in Poland and Commercial Metal’s recent investment in the country fortify the company’s prospects. Moreover, solid fabrication backlog and upbeat rebar-margin environment are anticipated to aid Commercial Metal’s fiscal 2020 performance.

The company has completed the ramp-up of production volume at the second micro mill in Durant, OK, with better-than-anticipated returns, supported by strong rebar demand and elevated metal margins. Also, it introduced a second spooler at the Arizona micro mill in the fiscal fourth quarter.

Commercial Metals has commenced construction on expanding the finished goods’ production capacity by approximately 400,000 metric tons at its Poland facility. The investment will enable the facility to fully utilize its existing melt capacity, and continue expansion into higher-margin wire rod and merchant products. The project will likely conclude by the end of fiscal 2020.

On Nov 5, 2018, the company completed the acquisition of certain U.S. rebar steel mills and 33 fabrication facilities from Gerdau S.A. The buyout added 2.5 million tons of rebar capacity as well as increased fabrication capacity by almost 50%. This gives a dominant share to Commercial Metals in the U.S. rebar market. Consequently, the company will have an expanded geographic presence in the nation’s largest construction region.

Estimates Moving Up

Annual estimates for Commercial Metals’ earnings per share moved up in the past 30 days, reflecting analysts’ confidence in the stock. During this period, the Zacks Consensus Estimate for fiscal 2020 earnings per share moved 3.4% north to $2.11.
Positive Growth Projections

The Zacks Consensus Estimate for Commercial Metals’ fiscal 2020 earnings per share is currently pegged at $2.11, indicating year-over-year growth of 1.44%.
Zacks Rank & Stocks to Consider

Commercial Metals currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Impala Platinum Holdings Ltd. IMPUY, Franco-Nevada Corporation FNV and Agnico Eagle Mines Limited AEM. While Impala Platinum sports a Zacks Rank #1 (Strong Buy), Franco-Nevada and Agnico Eagle carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Impala Platinum has an expected earnings growth rate of a whopping 255.2% for the current fiscal year. The company’s shares have soared 226.7% in the past year.

Franco-Nevada has a projected earnings growth rate of 46.2% for 2019. The company’s shares have rallied 41.5% in a year.

Agnico Eagle has an impressive estimated earnings growth rate of 168.6% for the current year. Its shares have appreciated 67.3% in the past year.

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