Analyst Sathish Kasinathan of Bank of America Securities reiterated a Buy rating on Commercial Metals Company, retaining the price target of $70.00.
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Sathish Kasinathan has given his Buy rating due to a combination of factors including Commercial Metals Company’s strategic acquisition of Concrete Pipe & Precast LLC (CP&P) for $675 million, which is expected to be accretive to earnings and cash flow. This acquisition allows CMC to diversify into the precast concrete market, a sector with high margins and lower capital intensity compared to its current operations. The deal is anticipated to provide significant synergies and growth opportunities, with CMC projecting incremental EBITDA from improved pricing strategies and market expansion.
Additionally, the acquisition is seen as a ‘clearing event’ that reduces the M&A overhang on the stock, making the valuation appear reasonable despite the higher multiple paid compared to CMC’s own. The precast concrete market is forecasted to grow at a CAGR of 5-7% through 2028, driven by infrastructure and construction trends, offering CMC a platform to scale both organically and inorganically. Overall, the acquisition aligns with CMC’s strategic goals and positions it favorably within the steel industry, particularly in the long products segment.
In another report released yesterday, Jefferies also maintained a Buy rating on the stock with a $70.00 price target.