A month has gone by since the last earnings report for Commercial Metals (CMC). Shares have added about 1.8% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
Commercial Metals' Q2 Earnings Top Estimates, Up Y/Y
Commercial Metals reported second-quarter fiscal 2021 adjusted earnings per share of 66 cents, beating the Zacks Consensus Estimate of 61 cents. The figure increased 24.5% year on year.
Including one-time items, the company recorded a net income of 54 cents per share in the fiscal second quarter compared with the prior-year quarter’s 53 cents.
Net sales for the reported quarter came in at $1,462 million compared with the year-ago quarter’s $1,341 million. The reported figure, however, missed the Zacks Consensus Estimate of $1,516 million.
Cost of goods sold in the quarter was up 9.3% year over year to $1,228 million. Gross profit was up 7.8% year over year to $234 million during this period. Core EBITDA was a record $171 million in the fiscal second quarter, reflecting year-over-year growth of 18%. The company achieved stable steel products metal margins, despite rapidly rising scrap costs.
The North America segment generated net sales of $1,257 million in the fiscal second quarter compared with the $1,161 million recorded in the prior-year quarter. The segment registered adjusted EBITDA of $172 million compared with the prior-year quarter’s $153 million.
The Europe segment’s revenues came in at $202 million, marking year-over-year growth of 12.2%. Adjusted EBITDA was $16 million in the fiscal second quarter compared with the year-ago quarter’s $13 million.
Commercial Metals reported cash and cash equivalents of $367 million at the end of fiscal second quarter compared with $542 million recorded at the end of fiscal 2020. The company’s long-term debt came in at $1,011 million at the end of the fiscal second quarter compared with $1,065 million as of Aug 31, 2020. Cash generated from operating activities was $1,203 million during the six months period ended Feb 28, 2021, compared with the $253 million during the six months period ended Feb 29, 2020.
On Mar 17, the company’s board announced a quarterly dividend of 12 cents per share. This dividend will be paid out on Apr 14 to shareholders of record as of Mar 31, 2021.
Commercial Metals continues to gain from ongoing network optimization efforts and the ramp up of its third rolling line in Poland this summer. The company believes that the finished steel volumes for North America and Europe operations will follow strong seasonal trends in third-quarter fiscal 2021 due to the start of the spring and summer construction seasons. Steel shipments and downstream products in North America will likely be supported by the company’s solid construction backlog.
Steel products are also benefiting from elevated spending on residential construction, continued recovery in the manufacturing sector and strong highway infrastructure activities. Given the increasing demand from construction and industrial end markets, volumes in Europe are anticipated to remain healthy. Management anticipates scrap margins on steel products in North America and Europe to increase sequentially after the realization of price adjustments made during the fiscal second quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 126.04% due to these changes.
Currently, Commercial Metals has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Commercial Metals has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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