Commercial Metals (CMC) Acquires Advanced Steel Recovery
Commercial Metals Company CMC recently announced that it has acquired Advanced Steel Recovery, LLC (ASR), a leading supplier of recycled ferrous metals located in Southern California. This will support CMC’s strategic expansion plans in the Western United States.
ASR's primary operations include processing and brokering capabilities that efficiently source material for sale in both domestic and export markets. ASR handles approximately 300,000 tons of scrap annually across its processing, industrial collection and brokerage platforms.
Commercial Metals’ focus on augmenting its core capabilities while expanding growth in the markets, customer groups and applications will aid growth. CMC continues gaining from its ongoing network optimization efforts, which will yield additional margins and reduce costs in the near future.
CMC is progressing well with the construction of its Arizona 2 micro mill, which will be the world's first mill to produce merchant bar quality steel products. The new mill will provide Commercial Metals with 400 thousand tons of rebar capacity to serve incremental infrastructure demand and about 150 thousand tons of merchant bar that will extend West Coast sales.
The mill will replace cost-intensiveness and inefficient rebar capacity of the former Steel California operations. It will further optimize Commercial Metals’ operational network and enhance customer service. This new plant will be capable of directly connecting to an on-site solar field, making it the world's greenest steel plant. It is expected to commence operations in early 2023.
The commencement of the mills’ operations will call for a secure and cost-effective supply of ferrous scrap. The addition of ASR ensures that both CMC's world-class mills in Arizona will have continued reliable access to vital raw materials.
Commercial Metals keeps benefiting from robust demand for finished steel across its most product lines in the spring and summer construction season on the back of its growing downstream backlog and solid levels of new construction work entering the project pipeline. In North America, CMC is witnessing strong demand for rebar and wire rods, driven by healthy construction markets. Customers’ order books are at multi-year highs.
Demand within Central Europe remains strong. The Polish construction market continues to grow, while an expanding manufacturing activity in Poland supports consumption of merchant and wire rod products.
Apart from seasonal factors, new contract wins and a strong construction backlog in North America as well as strength across its key end markets in North America and Europe will continue to boost the solid steel shipment volumes in fiscal 2022.
Price Performance
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Shares of Commercial Metals have fallen 6.3% in the past year compared with the industry’s decline of 20.9%.
Zacks Rank & Stocks to Consider
Commercial Metals currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the basic materials space include Albemarle Corporation ALB, Daqo New Energy Corp. DQ and Sociedad Quimica y Minera de Chile S.A. SQM.
Albemarle, sporting a Zacks Rank #1 (Strong Buy), has a projected earnings growth rate of 425.3% for the current year. The Zacks Consensus Estimate for ALB's current-year earnings has been revised 63.7% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
ALB’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average being 24.2%. The stock has gained around 46% in a year.
Daqo New Energy, currently flaunting a Zacks Rank of 1, has an expected earnings growth rate of 177.5% for the current year. The consensus estimate for DQ's current-year earnings has been revised 9.8% upward in the past 60 days.
Daqo New Energy’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed the mark on one occasion, the average beat being 10.8%. DQ has gained around 39% in a year’s time.
Sociedad has a projected earnings growth rate of 530.7% for the current year. The Zacks Consensus Estimate for SQM’s current-year earnings has been revised 18.8% upward in the past 60 days.
Sociedad has a trailing four-quarter earnings surprise of 27.2%. SQM has rallied roughly 39% in a year. The stock carries a Zacks Rank #2 (Buy) at present.
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