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Have you been paying attention to shares of Commercial Metals (CMC)? Shares have been on the move with the stock up 12.9% over the past month. The stock hit a new 52-week high of $34.72 in the previous session. Commercial Metals has gained 68.9% since the start of the year compared to the 15.5% move for the Zacks Basic Materials sector and the 62.6% return for the Zacks Steel - Producers industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on June 17, 2021, Commercial Metals reported EPS of $1.04 versus consensus estimate of $0.81 while it beat the consensus revenue estimate by 7.34%.
For the current fiscal year, Commercial Metals is expected to post earnings of $3.51 per share on $6.69 billion in revenues. This represents a 32.95% change in EPS on a 22.09% change in revenues. For the next fiscal year, the company is expected to earn $2.92 per share on $6.57 billion in revenues. This represents a year-over-year change of -16.67% and -1.77%, respectively.
Commercial Metals may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Commercial Metals has a Value Score of C. The stock's Growth and Momentum Scores are C and D, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 9.9X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 9.1X versus its peer group's average of 14X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Commercial Metals currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Commercial Metals fits the bill. Thus, it seems as though Commercial Metals shares could have potential in the weeks and months to come.
How Does Commercial Metals Stack Up to the Competition?
Shares of Commercial Metals have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also looking good, including Ternium (TX), Aperam (APEMY), and Nucor (NUE), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
The Zacks Industry Rank is in the top 5% of all the industries we have in our universe, so it looks like there are some nice tailwinds for Commercial Metals, even beyond its own solid fundamental situation.
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Commercial Metals Company (CMC) : Free Stock Analysis Report
Nucor Corporation (NUE) : Free Stock Analysis Report
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