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Here's Why Commercial Metals (CMC) is an Attractive Bet Now

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·4 min read
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  • CMC
  • NUE
  • OLN
  • BG

Commercial Metals Company CMC is gaining from robust steel demand, driven by elevated spending on the residential and construction sector in North America and recovery in the manufacturing sector. The company’s focus on price-rise across its mill products in response to rapidly-rising scrap costs and financial strength makes it an attractive investment option.

The company currently carries a Zacks Rank #2 (Buy) and has a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.

Let's discuss the factors that make the Commercial Metals stock a compelling investment option at the moment.

Positive Earnings Surprise Trend

The company has a trailing four-quarter earnings surprise of 7.4%, on average. In the past five years, the company generated earnings growth of 32%.

Impressive Price Performance

The company’s shares have gained 64.9% in the past year compared with the industry’s growth of 51.6%.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Upbeat Growth Projections

The Zacks Consensus Estimate for fiscal 2022 earnings per share is currently pegged at $3.70, indicating growth of 4.8% from the prior year’s figure. The same has moved up 10.7% in the past 60 days.

Solid Financial Position

Commercial Metals’ solid liquidity, financial position and focus on reducing debt will stoke growth. The company had a credit capacity of $699 million at the end of the fiscal fourth quarter, with cash in hand of $498 million. On Oct 13, the company’s board hiked the quarterly dividend by 17% to 14 cents per share, which marks its first dividend increase in more than a decade. Its net debt to trailing 12-month adjusted EBITDA ratio stood at 0.8 at the end of the fiscal fourth quarter, while net debt to capitalization is just 17%.

Other Growth Drivers

Commercial Metals continues to witness stellar demand for steel products across most end markets. In North America, the company is gaining from strong rebar demand, supported by the solid construction growth along with robust merchant bar and wire rod demand. Solid construction activity in Europe is driving new residential construction work in the region, primarily in Poland. Overall, a strong construction backlog in North America as well as strength across the key end markets in both North America and Europe will continue supporting the solid steel sales volumes in fiscal 2022.

Commercial Metals continue to gain from its ongoing network optimization efforts, which will generate additional margin and reduce costs in the near future. In sync with this, the capacity-curtailment initiative at the West Coast fabrication facility is likely to provide cost benefits in the days to come.

Commercial Metals is progressing well with the construction of a third micro mill in Arizona 2, which will be the world's first mill to produce merchant bar quality (MBQ) steel products. The company ramped up its third new rolling line in Europe, aiding the strong demand for merchant and wire rod products in the Central European industrial market. It is implementing price a rise across its mill products in response to the rapidly-rising scrap costs.

Other Stocks to Consider

Some other top-ranked stocks in the basic materials space are Olin Corporation OLN, Bunge Limited BG and Nucor Corporation NUE. While Olin and Bunge flaunt a Zacks Rank #1, Nucor carries a Zacks Rank #2.

Olin’s third-quarter 2021 adjusted earnings beat the Zacks Consensus Estimate, while revenues missed the same. It has an expected earnings growth rate of around 740% for the current fiscal year. The Zacks Consensus Estimate for current-year earnings has been revised 20.5% upward in the past 60 days.

Olin’s shares have surged 229% in the past year. The company has a long-term earnings growth of 56%.

Bunge’s third-quarter 2021 earnings and sales beat the respective Zacks Consensus Estimate. It has a trailing four-quarter earnings surprise of 105.7%, on average. The company has an estimated earnings growth rate of around 45% for the current year. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 36%.

Bunge’s shares have appreciated 60% in the past year. It has a long-term earnings growth of 12.6%.

Nucor’s third-quarter adjusted earnings missed the Zacks Consensus Estimate, while sales beat the same. It has a trailing four-quarter earnings surprise of 2.74%, on average.

Nucor has a projected earnings growth rate of around 583% for 2021. The Zacks Consensus Estimate for current-year earnings has been revised upward by 18.1% in the past 60 days. The company’s shares have soared 128% in a year.


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Nucor Corporation (NUE) : Free Stock Analysis Report

Bunge Limited (BG) : Free Stock Analysis Report

Commercial Metals Company (CMC) : Free Stock Analysis Report

Olin Corporation (OLN) : Free Stock Analysis Report

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