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Commercial Metals Company (CMC)
NYSE:CMC
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Commercial Metals Company
(NYSE:CMC)60Neutral
Positive Factors
Cost-Cutting Initiative
CMC introduced TAG initiative with the goal to improve the overall performance and profitability, targeting to complete ~150 initiatives and two larger initiatives expected to deliver $5-10m in annualized benefits.
Government Legislation
CMC is well positioned to capitalize on favorable but uncertain government legislation.
Investment Potential
Commercial Metals shares are considered a compelling investment for those seeking exposure to the construction and infrastructure markets.
Negative Factors
Legal Challenges
The company is facing legal challenges with a recent verdict against it for antitrust violations, which resulted in a significant financial penalty.
Market Conditions
Current market softness and elevated capital expenditure spending create a cautious stance on the stock.
Valuation Concerns
The stock was downgraded to Sell after a recent rally and court case loss, reflecting concerns over valuation and litigation impacts.
Commercial Metals Company (CMC) vs. S&P 500 (SPY)
Market Cap
$5.37B
Dividend Yield1.52%
Average Volume (3M)1.06M
Price to Earnings (P/E)42.5
Beta (1Y)1.39
Revenue Growth-8.66%
EPS Growth-82.83%
CountryUS
Employees13,178
SectorBasic Materials
Sector Strength56
IndustrySteel
Share Statistics
EPS (TTM)1.11
Shares Outstanding113,641,510
10 Day Avg. Volume1,189,961
30 Day Avg. Volume1,056,676
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.68
Price to Cash Flow (P/CF)6.30
P/FCF Ratio6.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$58.67Price Target Upside27.93% Upside
Rating ConsensusHold
Number of Analyst Covering8
Commercial Metals Company Business Overview & Revenue Model
Company DescriptionCommercial Metals Company (CMC) is a global leader in the manufacturing, recycling, and marketing of steel and metal products. With operations spanning across North America and Europe, CMC serves various industries including construction, manufacturing, and infrastructure. The company offers a diverse range of products such as rebar, merchant bar, wire rod, and structural steel, as well as providing metal recycling services through its extensive network of facilities.
How the Company Makes MoneyCommercial Metals Company generates revenue through several key streams: the sale of steel and metal products, metal recycling services, and fabrication services. The company operates steel mills, mini-mills, and fabricating plants that produce a wide variety of steel products which are sold to construction companies, manufacturers, and other industrial clients. CMC's recycling segment collects, processes, and resells scrap metal, providing raw materials for its steel production and generating additional revenue. Strategic partnerships and a strong supply chain further enhance CMC's market reach and profitability. The company's earnings are influenced by factors such as steel demand, commodity prices, and operational efficiency.
Commercial Metals Company Financial Statement Overview
Summary
Commercial Metals Company demonstrates strong operational efficiency with an excellent EBIT margin and low financial leverage, contributing positively to its financial stability. Despite these strengths, the company faces challenges such as declining revenue and free cash flow trends, which could hinder future growth and cash flexibility. The stable balance sheet and improved gross profit margin are positives, but the lower net profit margin and reduced assets indicate potential risks.Income Statement
The income statement reflects a volatile revenue pattern with a decrease from $8.8 billion in 2023 to $7.9 billion in 2024 and further to $7.8 billion in TTM 2024, indicating challenges in maintaining consistent growth. Gross profit margin improved significantly to 36.8% in TTM 2024 from 17.1% in 2023, highlighting better operational efficiency. However, net profit margin decreased to 1.7% in TTM 2024 from 9.8% in 2023, reflecting lower net income. EBIT margin is robust at 28.2% for TTM, suggesting strong core operations. Overall, while operational efficiency is commendable, the declining revenue trend poses a concern.75
Positive
Balance Sheet
The balance sheet indicates a healthy financial position with a debt-to-equity ratio of 0.30 in TTM 2024, suggesting low financial leverage. Stockholders' equity increased to $4.0 billion, providing a strong equity base. The equity ratio improved to 59.3%, demonstrating a solid asset base funded by equity. However, total assets decreased slightly, which could impact future growth potential. The overall stability and low leverage are positive signs for the company's financial health.80
Positive
Cash Flow
Cash flow analysis shows a decrease in free cash flow from $737 million in 2023 to $476 million in TTM 2024, indicating a downward trend in cash generation. The operating cash flow to net income ratio is high at 6.38, suggesting strong cash conversion from earnings. However, the declining trend in free cash flow could impact future financial flexibility. Despite efficient cash conversion, the lower free cash flow growth raises some concerns.70
Positive
| Breakdown | |||||
| TTM | Sep 2024 | Sep 2023 | Sep 2022 | Sep 2021 | Sep 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 7.83B | 7.93B | 8.80B | 8.91B | 6.73B | 5.48B | Gross Profit |
| 1.29B | 1.36B | 1.81B | 1.86B | 1.11B | 944.80M | EBIT |
| 475.17M | 693.60M | 1.17B | 1.31B | 600.74M | 441.02M | EBITDA |
| 508.75M | 963.93M | 1.39B | 1.49B | 753.53M | 598.37M | Net Income Common Stockholders |
| 133.50M | 485.49M | 859.76M | 1.22B | 412.87M | 279.50M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 856.10M | 857.92M | 592.33M | 672.60M | 497.75M | 542.10M | Total Assets |
| 6.77B | 6.82B | 6.64B | 6.24B | 4.64B | 4.08B | Total Debt |
| 1.19B | 1.19B | 1.15B | 1.50B | 1.07B | 1.08B | Net Debt |
| 330.99M | 331.70M | 562.47M | 829.45M | 572.04M | 541.58M | Total Liabilities |
| 2.76B | 2.52B | 2.52B | 2.95B | 2.34B | 2.19B | Stockholders Equity |
| 4.02B | 4.30B | 4.12B | 3.29B | 2.29B | 1.89B |
| Cash Flow | Free Cash Flow | ||||
| 476.20M | 575.44M | 737.44M | 250.32M | 44.31M | 603.59M | Operating Cash Flow |
| 851.67M | 899.71M | 1.34B | 700.31M | 228.47M | 791.20M | Investing Cash Flow |
| -370.01M | -323.00M | -835.23M | -684.72M | -162.13M | -192.94M | Financing Cash Flow |
| -331.26M | -313.76M | -599.48M | 165.31M | -109.39M | -247.79M |
Commercial Metals Company Technical Analysis
Negative
45.86
Price Trends
49.46
Negative
53.44
Negative
53.47
Negative
Market Momentum
-1.11
Positive
36.40
Neutral
34.41
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CMC, the sentiment is Negative. The current price of 45.86 is below the 20-day moving average (MA) of 49.44, below the 50-day MA of 49.46, and below the 200-day MA of 53.47, indicating a bearish trend. The MACD of -1.11 indicates Positive momentum. The RSI at 36.40 is Neutral, neither overbought nor oversold. The STOCH value of 34.41 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for CMC.
Commercial Metals Company Risk Analysis
Commercial Metals Company disclosed 36 risk factors in its most recent earnings report. Commercial Metals Company reported the most risks in the “Production” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Commercial Metals Company Peers Comparison
Overall Rating
UnderperformOutperform
Sector (47)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
73 Outperform | $30.54B | 15.66 | 9.79% | 1.64% | -11.46% | -53.29% | |
72 Outperform | $5.79B | 7.21 | 8.98% | 4.79% | -11.75% | -45.90% | |
72 Outperform | $19.18B | 12.97 | 17.27% | 1.47% | -6.68% | -32.96% | |
67 Neutral | $6.05B | 73.52 | -0.44% | 10.05% | 17.34% | -71.47% | |
60 Neutral | $5.37B | 42.53 | 3.24% | 1.52% | -8.66% | -82.83% | |
52 Neutral | $8.43B | 23.96 | 3.43% | 0.53% | -13.48% | -56.94% | |
47 Neutral | $2.64B | -4.00 | -31.55% | 3.33% | 2.93% | -29.90% |
* Basic Materials Sector Average
Performance Comparison
CMC
Commercial Metals Company
45.86
-5.93
-11.45%
GGB
Gerdau SA
2.95
-0.45
-13.24%
NUE
Nucor
133.72
-48.42
-26.58%
STLD
Steel Dynamics
125.03
-3.01
-2.35%
TX
Ternium SA
31.36
-5.86
-15.74%
X
United States Steel
36.23
-10.63
-22.68%
Commercial Metals Company Earnings Call Summary
Earnings Call Date: Jan 6, 2025 | % Change Since: -5.87% | Next Earnings Date: Mar 20, 2025
Earnings Call Sentiment Neutral
The earnings call reflected a balanced outlook with both positive and negative elements. While CMC faces challenges such as a net loss driven by litigation expenses and economic uncertainties affecting steel pricing, there are strong indicators of future demand, robust infrastructure activity, and significant cost management initiatives that offer optimism for the future.Highlights
Strong Late-Season Demand for Rebar
Strong late-season demand for rebar as job sites worked to catch up from days lost to weather disruptions earlier in the year.
Cost Management and Operational Excellence
Excellent cost management continues to be a bright spot with ongoing efforts to reduce alloy consumption and improve melt shop yields, projected to save $10 to $15 million annually.
Robust Infrastructure Demand
Infrastructure demand is strong and expected to grow over the next 3 to 5 years, driven by multiyear trends in the construction industry.
Positive Market Indicators
Dodge Momentum Index remains 55% above its pre-pandemic average, indicating confidence in future construction activity.
Arizona 2 Facility Progress
Arizona 2 facility achieved consecutive monthly production records, with output levels expected to reach nameplate capacity by the end of fiscal 2025.
Lowlights
Net Loss for the Quarter
Reported a net loss of $175.7 million for the first quarter, including a $264 million after-tax charge for litigation expense.
Litigation Verdict Against CMC
Jury verdict against CMC in litigation with Pacific Steel Group, resulting in a $110 million judgment.
North America Steel Group Impacted by Economic Uncertainty
Economic uncertainty has pressured steel pricing and margins, though underlying demand for steel products remains robust.
Europe Steel Group Challenges
Challenging conditions in Europe with increased rebar imports, leading to stagnant metal margins and pressure on profitability.
Emerging Businesses Group Profitability Softened
Profitability softened due to temporary dynamics, including lower margin sales mix and project delays in the Tensar division.
Company Guidance
During the CMC Q1 2025 earnings call, the company provided guidance for the second fiscal quarter, anticipating a decline in consolidated financial results compared to the first quarter. The North American Steel Group's finished steel shipments are expected to follow normal seasonal trends, while the adjusted EBITDA margin is projected to decrease due to lower margins over scrap costs on steel and downstream products. The Europe Steel Group's adjusted EBITDA should align with the prior year's second quarter, as cost management offsets a weak market environment. The Emerging Businesses Group's financial results are expected to decline due to normal seasonality but remain consistent with prior-year results. CMC remains optimistic about the remainder of fiscal 2025, driven by strong structural demand trends, particularly in infrastructure projects and nonresidential construction, despite current market uncertainties.Commercial Metals Company Corporate Events
Legal ProceedingsBusiness Operations and StrategyFinancial Disclosures
Commercial Metals Faces Litigation Impact in Q1 2025
Negative
Jan 6, 2025
Commercial Metals Company reported a net loss of $175.7 million in the first quarter of fiscal 2025 due to a significant litigation expense, although adjusted earnings were $88.5 million. Despite economic uncertainty affecting steel pricing and margins, the company maintained stable North American downstream backlog volumes and strong future project pipelines. The company’s ongoing strategic growth plan, including the Transform, Advance, and Grow (TAG) program, is expected to enhance financial performance, while its European operations face market challenges. A judgment in a legal case resulted in a substantial provision, impacting financial results, and CMC plans to appeal the verdict.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.