Commercial Metals Company CMC looks promising at the moment, driven by robust key end markets, acquisitions and growth in the United States and Poland. We are positive about the company’s prospects and believe, this is the right time to add the stock to your portfolio as it is poised to carry the bullish momentum ahead.
Shares of the company have surged 38.3% over the past year against the industry’s decline of 1.3%.
The company currently carries a Zacks Rank #2 (Buy) and 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) 2 or 3 (Hold) offer the best investment opportunities.
Let's delve deeper into the factors that make Commercial Metals stock a compelling investment option at the moment.
Positive Earnings Surprise History
Commercial Metals outpaced the Zacks Consensus Estimate in three of the trailing four quarters, the average positive surprise being 5.76%.
Annual estimates for Commercial Metals’ earnings per share moved north in the past 30 days, reflecting analysts’ confidence in the stock. During the period, the Zacks Consensus Estimate for fiscal 2020 earnings per share has been revised 5.2% upward to $2.22. The company has an estimated long-term earnings growth rate of 3.8%.
Return on Assets (ROA)
Commercial Metals currently has a Return on Assets (ROA) of 6.6% while the industry average is 2.9%. An above-average ROA denotes that the company is generating earnings by effectively managing assets.
Return on Equity (ROE)
Commercial Metals’ trailing 12-month ROE of 16% reinforces its growth potential. The company’s ROE is higher than the ROE of 6.2% for the industry, highlighting its efficiency in utilizing shareholders’ funds.
Growth Drivers in Place
Spending in U.S. construction activity continues to flare up, which will further translate into improved long-product steel demand. Robust markets in Poland and Commercial Metals’ recent investment in the country fortify the company’s prospects. Moreover, solid fabrication backlog and upbeat rebar-margin environment are anticipated to aid Commercial Metals’ fiscal 2020 performance.
The company completed its ramp-up of production volume at the second micro mill in Durant, OK with higher-than-anticipated returns, supported by strong rebar demand and elevated metal margins. Also, it unveiled a second spooler at the Arizona micro mill in the fiscal fourth quarter.
Commercial Metals commenced construction to expand the finished goods’ production capacity by approximately 400,000 metric tons at its Poland facility. The investment will enable the plant to fully utilize its existing melt capacity and continue expanding into higher-margin wire rod and merchant products. The project will likely conclude by the end of fiscal 2020.
On Nov 5, 2018, the company completed the acquisition of certain U.S. rebar steel mills and 33 fabrication facilities from Gerdau S.A. The buyout added 2.5 million tons of rebar capacity and increased fabrication capacity by almost 50%. This gives a plum share to Commercial Metals in the U.S. rebar market. Evidently, the company will have an extended geographic presence in the nation’s largest construction region.
Other Stocks to Consider
Some other top-ranked stocks in the Basic Materials space are General Moly, Inc GMO, Franco-Nevada Corp. FNV and Sandstorm Gold Ltd SAND, each currently carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
General Moly has an expected earnings growth rate of 12.5% for the current fiscal year. The company’s shares have gained 7.2% in the past year.
Franco-Nevada has a projected earnings growth rate of 45.3% for 2019. The stock has rallied 36.5% in a year’s time.
Sandstorm Gold has an estimated earnings growth rate of 166.7% for the ongoing year. Its shares have appreciated 45.9% over the past year.
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Franco-Nevada Corporation (FNV) : Free Stock Analysis Report
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