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Commercial Metals (CMC) Gains From Solid Steel Demand, Cost Cuts
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Commercial Metals Company (CMC - Free Report) is gaining from robust steel demand, driven by higher spending on the residential and construction sector in North America and Europe as well as recovery in the manufacturing sector. Also, the company’s focus on price hikes across its mill products in response to rapidly-rising scrap costs will drive growth.
Solid Steel Demand to Aid Growth
Commercial Metals continues to witness stellar demand for steel products across most end markets. In North America, the company is gaining from strong rebar demand, supported by solid construction growth along with robust merchant bar and wire rod demand. Higher construction activities in Europe are driving new residential construction work in the region, primarily in Poland. A solid construction backlog in North America and strength across the key end markets in both North America and Europe will keep supporting the solid steel sales volumes in fiscal 2022.
Cost Savings to Bolster Margin
Commercial Metals continues to gain traction from ongoing network-optimization efforts, which will generate additional margin and reduce costs in the near future. In sync with this, the capacity-curtailment initiative at the West Coast fabrication facility is likely to provide cost benefits in the days to come. In December 2020, the company closed its Steel California operations and transitioned the supply chain for the California market to reduce cost material produced in the Central and East regions. Through these actions, the company is generating an annual EBITDA of around $25 million and targets to achieve annual optimization benefits of $50 million. It is also implementing price hikes across its mill products in response to the rapidly-rising scrap costs.
Investment in Mill Construction & Acquisitions to Drive Growth
Commercial Metals is progressing well with the construction of a third micro mill in Arizona 2, which will be the world's first mill to produce merchant bar quality (MBQ) steel products. The company ramped up its third new rolling line in Europe, catering to the strong demand for merchant and wire rod products in the Central European industrial market.
Recently, the company entered into an agreement to acquire Tensar for $550 million. The deal will help Commercial Metals to accelerate growth in complementary high-margin engineered products for its largest targeted core market, construction, serving end-use markets and customer segments.
Solid Financial Position
Commercial Metals’ solid liquidity, financial position and focus on reducing debt will stoke growth. The company had a credit capacity of $699 million at the end of the fiscal fourth quarter, with cash in hand of $498 million. On Oct 13, the company’s board hiked the quarterly dividend by 17% to 14 cents per share, which marks its first dividend increase in more than a decade. Its net debt to trailing 12-month adjusted EBITDA ratio stood at 0.8 at the end of the fiscal fourth quarter, while net debt to capitalization is just 17%.
Price Performance
The company’s shares have gained 74.8% in the past year compared with the industry’s growth of 31%.
A few other top-ranked stocks from the basic materials space include The Chemours Company (CC - Free Report) , Haynes International, Inc. (HAYN - Free Report) and AdvanSix Inc. (ASIX - Free Report) . While Chemours and Haynes sport a Zacks Rank #1, AdvanSix carries a Zacks Rank #2 (Buy).
Chemours has an expected earnings growth rate of 104% for the current year. The Zacks Consensus Estimate for CC’s earnings for the current year has been revised upward by 10% in the past 60 days.
Chemours beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 34.2%. CC has gained 22.8% over a year.
Haynes has an expected earnings growth rate of 298.6% for fiscal 2022. The Zacks Consensus Estimate for its fiscal 2022 earnings has been revised upward by 53.2% in the past 60 days.
Haynes beat the Zacks Consensus Estimate for earnings in three of the four trailing quarters, the average surprise being 83.1%. HAYN’s shares have rallied 76.7% over a year.
AdvanSix has an expected earnings growth rate of 194.5% for the current year. The Zacks Consensus Estimate for its current-year earnings has been revised upward by 14.1% in the past 60 days.
AdvanSix beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 47%. ASIX’s shares have soared 127.6% over a year.
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Commercial Metals (CMC) Gains From Solid Steel Demand, Cost Cuts
Commercial Metals Company (CMC - Free Report) is gaining from robust steel demand, driven by higher spending on the residential and construction sector in North America and Europe as well as recovery in the manufacturing sector. Also, the company’s focus on price hikes across its mill products in response to rapidly-rising scrap costs will drive growth.
Solid Steel Demand to Aid Growth
Commercial Metals continues to witness stellar demand for steel products across most end markets. In North America, the company is gaining from strong rebar demand, supported by solid construction growth along with robust merchant bar and wire rod demand. Higher construction activities in Europe are driving new residential construction work in the region, primarily in Poland. A solid construction backlog in North America and strength across the key end markets in both North America and Europe will keep supporting the solid steel sales volumes in fiscal 2022.
Cost Savings to Bolster Margin
Commercial Metals continues to gain traction from ongoing network-optimization efforts, which will generate additional margin and reduce costs in the near future. In sync with this, the capacity-curtailment initiative at the West Coast fabrication facility is likely to provide cost benefits in the days to come. In December 2020, the company closed its Steel California operations and transitioned the supply chain for the California market to reduce cost material produced in the Central and East regions. Through these actions, the company is generating an annual EBITDA of around $25 million and targets to achieve annual optimization benefits of $50 million. It is also implementing price hikes across its mill products in response to the rapidly-rising scrap costs.
Investment in Mill Construction & Acquisitions to Drive Growth
Commercial Metals is progressing well with the construction of a third micro mill in Arizona 2, which will be the world's first mill to produce merchant bar quality (MBQ) steel products. The company ramped up its third new rolling line in Europe, catering to the strong demand for merchant and wire rod products in the Central European industrial market.
Recently, the company entered into an agreement to acquire Tensar for $550 million. The deal will help Commercial Metals to accelerate growth in complementary high-margin engineered products for its largest targeted core market, construction, serving end-use markets and customer segments.
Solid Financial Position
Commercial Metals’ solid liquidity, financial position and focus on reducing debt will stoke growth. The company had a credit capacity of $699 million at the end of the fiscal fourth quarter, with cash in hand of $498 million. On Oct 13, the company’s board hiked the quarterly dividend by 17% to 14 cents per share, which marks its first dividend increase in more than a decade. Its net debt to trailing 12-month adjusted EBITDA ratio stood at 0.8 at the end of the fiscal fourth quarter, while net debt to capitalization is just 17%.
Price Performance
The company’s shares have gained 74.8% in the past year compared with the industry’s growth of 31%.
Zacks Rank & Other Stocks to Consider
Commercial Metals currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
A few other top-ranked stocks from the basic materials space include The Chemours Company (CC - Free Report) , Haynes International, Inc. (HAYN - Free Report) and AdvanSix Inc. (ASIX - Free Report) . While Chemours and Haynes sport a Zacks Rank #1, AdvanSix carries a Zacks Rank #2 (Buy).
Chemours has an expected earnings growth rate of 104% for the current year. The Zacks Consensus Estimate for CC’s earnings for the current year has been revised upward by 10% in the past 60 days.
Chemours beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 34.2%. CC has gained 22.8% over a year.
Haynes has an expected earnings growth rate of 298.6% for fiscal 2022. The Zacks Consensus Estimate for its fiscal 2022 earnings has been revised upward by 53.2% in the past 60 days.
Haynes beat the Zacks Consensus Estimate for earnings in three of the four trailing quarters, the average surprise being 83.1%. HAYN’s shares have rallied 76.7% over a year.
AdvanSix has an expected earnings growth rate of 194.5% for the current year. The Zacks Consensus Estimate for its current-year earnings has been revised upward by 14.1% in the past 60 days.
AdvanSix beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 47%. ASIX’s shares have soared 127.6% over a year.