Commercial Metals Company (CMC - Free Report) looks promising at the moment owing to robust key end markets, acquisitions and growth in the United States and Poland. We are positive about the company’s prospects and believe that this is the right time to add the stock to your portfolio as it is poised to carry on with the bullish momentum.
The company currently carries a Zacks Rank #1 (Strong Buy) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 (Strong Buy) 2 or 3 (Hold) offer the best investment opportunities.
Let's delve deeper into the factors that make the Commercial Metals stock a compelling investment option at the moment.
Positive Earnings Surprise History
Commercial Metals outpaced the Zacks Consensus Estimate in the trailing four quarters, the average positive surprise being 15.3%.
Commercial Metals’ earnings estimates for the current year moved north in the past 60 days, reflecting analysts’ confidence in the stock. During the period, the Zacks Consensus Estimate for fiscal 2020 earnings per share has been revised 3.7% upward to $2.53. The company has an estimated long-term earnings growth rate of 3.8%.
Return on Assets (ROA)
Commercial Metals currently has a Return on Assets (ROA) of 7.8%, while the industry average is 1.3%. An above-average ROA denotes that the company is generating earnings by effectively managing assets.
Return on Equity (ROE)
Commercial Metals’ trailing 12-month ROE of 18.4% reflects its growth potential. The company’s ROE is higher than the ROE of 2.8% for the industry, highlighting its efficiency in utilizing shareholders’ funds.
Growth Drivers in Place
Spending in construction activity in the United States continues to flare up, thanks to spending on state and local highway projects. This will likely translate into improved demand for long-product steel and rebar. Construction demand in Poland and the company’s investment in the country are likely to lead to improved results. Moreover, a solid fabrication backlog and a rebar-margin environment are expected to aid Commercial Metal’s performance in fiscal 2020.
The company has completed ramping up production volumes at its second micro mill in Durant, OK, with better-than-anticipated returns, supported by strong rebar demand and elevated metal margins. Furthermore, the company’s optimization efforts and an expanded domestic mill capacity will yield results in the days ahead.
Additionally, Commercial Metals closed the Rancho Cucamonga, CA, melting operations. This move will lower the cost of finished rebar from Rancho, while supporting utilization rates at other mills. The company expects capital spending for fiscal 2020 between $160 million and $185 million.
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 and increased fabrication capacity by almost 50%. This gives a plum share to Commercial Metals in the U.S. rebar market. Evidently, the company will have an extended geographic presence in the nation’s largest construction region.
Shares of the company have lost 3.9% over the past year compared with the industry’s decline of 44.2%.
Other Stocks to Consider
Some other top-ranked stocks in the basic materials space include Daqo New Energy Corp (DQ - Free Report) , Sibanye Gold Limited (SBSW - Free Report) and Impala Platinum Holdings Limited (IMPUY - Free Report) , each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Daqo New Energy has an expected long-term earnings growth rate of 29%. The company’s shares have surged 73.2% in the past year.
Sibanye has an expected long-term earnings growth rate of 20.4%. Its shares have soared 109.5% in a year’s time.
Impala Platinum has a projected long-term earnings growth rate of 26.5%. The company’s shares have appreciated 125.3% over the past year.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>