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Commercial Metals Misses, Profit Tanks

Zacks Equity Research

Commercial Metals Company (CMC) raked in earnings of 16 cents per share in third-quarter fiscal 2013 (ended May 31), down from 35 cents per share recorded a year ago. It also missed the Zacks Consensus Estimate by 3 cents.

Profit tumbled roughly 53% year over year to $19 million. Lower shipments of merchant and light structural products hurt the Texas-based steel and metals maker’s Americas Mills segment and thereby its bottom line.

Revenues fell 11% year over year to around $1,794 million, falling well short of the Zacks Consensus Estimate of $1,914 million. Commercial Metals saw lower sales across most of its business segments in the quarter. Adjusted operating profit dipped roughly 21% to $55.8 million.

Revenues from Commercial Metals’ Americas Recycling segment slipped 17% to roughly $342 million, hurt by lower ferrous selling prices.

The Americas Mills segment logged sales of roughly $504 million, down 11% year over year. Lower shipping volume of merchant and light structural products contributed to the fall. However, Commercial Metals witnessed higher shipment volume for rebar in the quarter.

On a positive note, revenues from the Americas Fabrication unit edged up around 1% to $384 million.

Challenging conditions in Europe coupled with lower volumes of merchant and wire rod products contributed to a 20% decline in revenues from the International Mill division to $201 million.

Revenues from the International Marketing and Distribution segment fell 13% to $594 million. Lower revenues in the raw materials business and losses from the company’s Australian operations hurt the division’s results.

Commercial Metals ended the third quarter with cash and cash equivalents of $453 million, up 94% year over year. Total long-term debt increased 22% year over year to $1,422 million.

Moving ahead, Commercial Metals expects results for the fourth quarter to be in line with the third. The company added that while domestic non-residential construction is showing some improvement of late, it still lacks signs of a broad-based recovery.

Commercial Metals anticipates continued sequential improvement in results in the International Mill unit on volume gains. However, the company envisions the International Marketing and Distribution segment to face continued challenges until sustained improvements in the global markets takes hold. Moreover, recovery in the European markets is expected to lag the rest of the world.

Commercial Metals currently carries a Zacks Rank #5 (Strong Sell).

Other steel producing companies worth considering are Kobe Steel Ltd. (KBSTY), Shiloh Industries Inc. (SHLO) and Nippon Steel & Sumitomo Metal Corporation (NSSMY). All of them hold a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on SHLO

Read the Full Research Report on CMC

Read the Full Research Report on KBSTY

Read the Full Research Report on NSSMY

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