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What's in the Cards for Commercial Metals' (CMC) Q1 Earnings?

Zacks Equity Research

Commercial Metals Company CMC is scheduled to report first-quarter fiscal 2020 results on Jan 6, before the opening bell.

Which Way are the Estimates Headed?

The Zacks Consensus Estimate for the fiscal first-quarter revenues suggests growth of 13.2% to $1.45 billion. The Zacks Consensus Estimate for earnings per share is pegged at 56 cents for the quarter, suggesting a 60% jump from the year-ago quarter.

Q4 Performance

In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate, while revenues missed the same. Both top and bottom lines improved year over year. The company surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average positive surprise being 5.76%.

Let’s see how things are shaping up prior to this announcement.

Commercial Metals Company Price and EPS Surprise

Commercial Metals Company Price and EPS Surprise

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

Earnings Whisper

Our proven model predicts an earnings beat for Commercial Metals this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Commercial Metals has an Earnings ESP of +18.92%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are currently pegged at 66 cents per share and 56 cents per share, respectively.

Zacks Rank: The company currently carries a Zacks Rank of 3.
 
Key Factors to Consider

Increased spending on construction activity in the United States and favorable markets in Poland are likely to have contributed to the company’s first-quarter fiscal performance.

The Zacks Consensus Estimate for the Americas Recycling segment’s revenues is pegged at $238 million for the to-be-reported quarter, suggesting a decline of 21.2% from the year-ago quarter. However, the segment is expected to report an operating loss of $0.98 million, as against the operating profit of $15.4 million recorded in the year-ago quarter.

For the Americas Mills segment revenues, the Zacks Consensus Estimate is pinned at $763 million, projecting 26.7% year-on-year growth from the prior-year quarter’s $602 million. The segment’s operating profit is projected at $135 million, indicating an improvement of 18.4% from the $114 million reported in the prior-year quarter. Benefits from the acquisition of certain U.S. rebar steel mill and fabrication assets from Gerdau S.A, production of spooled material at the Arizona micro mill, expansion of finished goods production capacity at the Polish facility and strong rebar demand at the micro mill in Durant, OK, will likely have aided the company’s performance in the to-be-reported quarter.

The Americas Fabrication segment is anticipated to report revenues of $591 million in the fiscal first quarter, indicating a 35.2% jump from the $437 million recorded in the year-ago quarter. The segment is expected to report an operating profit of 75 cents per share as against the prior-year quarter’s operating loss of 37 cents.

The Zacks Consensus Estimate for the International Mill segment’s revenues is currently pegged at $172 million for the fiscal first quarter, suggesting a decline of 24.2% from the prior-year quarter. The Zacks Consensus Estimate for the segment’s operating income is $8.43 million for the quarter, indicating a slump of 74.3% from the year-ago reported figure.

Nevertheless, inflationary pressures on manufacturing costs due to a tight labor market, and consumable raw-material prices are expected to have dented the company’s margins in the quarter. Furthermore, its debt to equity ratio has gone up to fund the acquisition of certain U.S. rebar steel mill and fabrication assets from Gerdau S.A. Consequently, the company’s margins in the quarter under review are expected to reflect the negative impact of higher interest expense.

Stocks Worth a Look

Here are few Basic Materials stocks which you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

Franco-Nevada Corporation FNV has an Earnings ESP of +2.97% and carries a Zacks Rank #2, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Nucor Corporation NUE has an Earnings ESP of +1.90% and holds a Zacks Rank of 2, at present.

Southern Copper Corporation SCCO, currently a Zacks #3 Ranked stock, has an Earnings ESP of +1.75%.

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