Commercial Metals Posts Better-than-Expected Q3 Results

The steel and metal manufacturer Commercial Metals Company (CMC) posted strong fiscal Q3 results as both revenues and earnings outpaced analysts’ expectations and increased year-over-year.

The company reported net sales of $1.85 billion in fiscal Q3, which grew 38.5% from the year-ago period and beat revenue expectations of $1.72 billion.

North American sales were up 33.5% year-over-year, while European sales increased 63.5%.

Adjusted earnings came in at $1.04 per share, beating consensus estimates of $0.83 per share, and increased 76.3% year-over-year.

Commercial Metals CEO Barbara R. Smith said, “Strong demand across multiple end-use markets should support robust shipment levels of finished steel during the fourth quarter in both North America and Europe. Construction activity is strong and the industrial sectors are growing in both the U.S. and Central Europe, as both regions continue to recover from the pandemic. We expect margins over scrap on steel products in North America and Europe to be relatively flat or up modestly from third quarter levels.”

Ms. Smith further added, “Increased willingness of downstream customers in our North America segment to contract new work and the stability of our construction backlog both point to continued demand strength. This view is supported by several widely monitored construction indicators that generally lead activity by nine to twelve months, which have improved significantly in 2021.” (See Commercial Metals stock chart on TipRanks)

On June 16, J.P. Morgan analyst Michael Glick initiated coverage on the stock with a Hold rating and a price target of $39 (29.4% upside potential).

Glick expects the stock to outperform as an infrastructure bill is expected to pass in Congress soon. However, the analyst believes that the company offers less upside and considerably lower free cash flow yield versus its peers in the carbon steel space.

The rest of the Street is bearish on the stock with a Moderate Sell consensus rating based on 4 Holds versus 2 Sells. The CMC average analyst price target of $30.83 implies 2.3% upside potential from the current levels. Shares have increased 47% over the past year.