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Commercial Metals (CMC) Earnings & Sales Top Estimates in Q4

Zacks Equity Research
·5 min read

Commercial Metals Company CMC reported fourth-quarter fiscal 2020 (ended Aug 31, 2020) adjusted earnings per share of 79 cents, beating the Zacks Consensus Estimate of 60 cents. The figure increased 4% year on year.

Including one-time items, the company reported net income of 56 cents per share in the fiscal fourth quarter compared with the prior-year quarter’s 72 cents.

Net sales for the reported quarter slid 8.7% year over year to $1,409 million. However, the reported figure beat the Zacks Consensus Estimate of $1,384 million.

Cost of goods sold in the quarter was down 11.2% year over year to $1,146 million. Gross profit was up 4% year over year to $263 million during this period. Core EBITDA was $176 million in the fiscal fourth quarter compared with the year-ago quarter’s $159 million.

Commercial Metals Company Price, Consensus and EPS Surprise

Commercial Metals Company Price, Consensus and EPS Surprise
Commercial Metals Company Price, Consensus and EPS Surprise

Commercial Metals Company price-consensus-eps-surprise-chart | Commercial Metals Company Quote

Segment Performance

Commercial Metals recently announced that the company has realigned its reporting structure into two operating segments — North America and Europe — from the beginning of fourth-quarter fiscal 2020. North America includes the company's former Americas Recycling, Americas Mills and Americas Fabrication business segments. Europe comprises the company's former International Mill segment.

The North America segment reported net sales of $1,225 million in the fiscal fourth quarter compared with the $1,333 million recorded in the prior-year quarter. The segment reported adjusted EBITDA of $174 million compared with the prior-year quarter’s $152 million.

The Europe segment’s revenues came in at $179.8 million, marking a year-over-year decline of 12.3%. Adjusted EBITDA was $23 million in the fiscal fourth quarter, flat year over year.

Financials

Commercial Metals exited fiscal 2020 with cash and cash equivalents of $542 million compared with the $192 million recorded at the end of fiscal 2019. The company’s long-term debt reduced to $1,065 million at the end of fiscal 2020 from $1,227 million recorded at the end of fiscal 2019. Cash flow from operating activities was $791 million during fiscal 2020 compared with the prior fiscal’s $37 million.

On Oct 14, the company’s board announced a quarterly dividend of 12 cents per share. This dividend will be paid on Nov 13, to shareholders of record on Oct 29, 2020.

Fiscal 2020 Performance

Adjusted earnings per share in fiscal 2020 improved 27% year over year to $2.64, which surpassed the Zacks Consensus Estimate of $2.44. Including one-time items, the company reported earnings per share of $2.31 in fiscal 2020 compared with the $1.67 recorded in fiscal 2019.

Net sales in fiscal 2020 dropped 6% year over year to $5.48 billion. However, the reported figure beat the Zacks Consensus Estimate of $5.45 billion.

Outlook

Commercial Metals believes finished steel volumes for North America and Europe operations will follow seasonal trends in the first-quarter fiscal 2021, while North America operations will be adversely impacted by storms in the Texas and Gulf Coast markets. Meanwhile, solid construction backlog will support steel shipments and downstream products in the near term.

The company anticipates the recent rise in scrap costs to impact margins  in its North America business in the fiscal first quarter to. This will however be partly negated by increase in steel price that have come into effect in the ongoing quarter. Long products steel market in Europe is expected to remain challenged due to elevated import levels.

Nevertheless, strong demand, spurred by recovery in the construction sector and rebound in Central European industrial production, will drive growth.

The company expects its ongoing network-optimization efforts will yield additional margin and working capital benefits in the near future. Additionally, Commercial Metals announced the construction of a third micro mill in Arizona, which will be the world's first to produce merchant bar quality (MBQ) steel products. The new facility is expected to commence operation in early 2023.

Price Performance

Commercial Metals’ shares have gained 19.6% over the past year, outperforming the industry’s growth of 0.3%.

Zacks Rank & Stocks to Consider

Commercial Metals currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space include Brenntag AG BNTGY, Equinox Gold Corp. EQX and Comstock Mining, Inc. LODE, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Brenntag has an expected earnings growth rate of 4.4% for 2020. The company’s shares have rallied 37.3% over the past year.

Equinox has an estimated earnings growth rate of 148.3% for the current year. The stock has surged 130.1% in the past year.

Comstock Mining has a projected earnings growth rate of 370% for 2020. Its shares have rallied 140.5% in the past year.

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Commercial Metals Company (CMC) : Free Stock Analysis Report
 
Comstock Mining, Inc. (LODE) : Free Stock Analysis Report
 
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Equinox Gold Corp. (EQX) : Free Stock Analysis Report
 
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