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Category: Stock Market and Commercial Metals Company
Date: 7 January 2020 Stock Price: $22.12 We take a look at the 1st quarter earnings report of their 2020 fiscal year of Commercial Metals Company, a manufacturer, recycler and marketer of steel and metal products, related products and services.
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About Commercial Metals Company
Founded in 1915, Commercial Metals Company (CMC) and its subsidiaries manufacture, recycle and market steel and metal products, related materials and services through a network of facilities that includes seven electric arc furnace (“EAF”) mini mills, two EAF micro mills, two rerolling mills, steel fabrication and processing plants, construction-related product warehouses and metal recycling facilities in the United States and Poland. CMC is an efficient, environmentally responsible, high quality and low-cost metal recycler, steel manufacturer and fabricator
Overview of Commercial Metals Company's 1st quarter 2020 earnings report
- Net sales: $1.384 billion (up from $1.277 billion for the same quarter of the previous year)
- Net sales increased by 8.3% over the last 12 months
- Costs and expenses: $1.274 billion (up from $1.252 billion for the same quarter of the previous year)
- Costs and expenses increased by 1.8% over the last 12 months
- Net income: $83.348 million (up from $19.742 million for the same quarter of the previous year)
- Diluted earnings per share: $0.70 (up from $0.17 for the same quarter of the previous year)
- PE ratio of Commercial Metals Company : 7.9
- Diluted weighted-average shares outstanding: 119.773 million (up from 118.682 million for the same quarter of the previous year)
- Cash and cash equivalents: $224.797 million
- Cash and cash equivalents per share: $1.88
- Cash and cash equivalents makes up 8.48% of Commercial Metals Company's market capital
- Cash and cash equivalents makes up 5.9% of Commercial Metals Company's total assets
- Accounts receivable: $961.458 million
- Accounts receivable makes up 25.2% of Commercial Metals Company's total assets
- Inventories: $649.681 million
- Inventories makes up 17.1% of Commercial Metals Company's total assets
- Stockholders equity of Commercial Metals Company: $1.701 billion
- Stockholders equity per share for Commercial Metals Company's : $14.20
- So Commercial Metals Company is trading at 1.55 times it stockholders equity per share which is outside the expected range of between 2 and 4 times most companies tend to trade at.
- Cash provided by operating activities for the 3 months of the fiscal year: $146.418 million
- Cash provided by operating activities per share for the 3 months of the fiscal year: $1.22
Commercial Metals Company's management commentary on their 1st quarter 2020 earnings
IRVING, Texas, Jan. 6, 2020 /PRNewswire/ -- Commercial Metals Company (NYSE: CMC) today announced financial results for its fiscal first quarter ended November 30, 2019. First quarter earnings from continuing operations were $82.8 million, or $0.69 per diluted share, on net sales of $1.4 billion, compared to prior year period earnings from continuing operations of $19.4 million, or $0.16 per diluted share, on net sales of $1.3 billion. Net sales increased 8% on a year-over-year basis driven by the Company's growth strategy and strong fundamentals in its core markets.
Barbara R. Smith, Chairman of the Board, President and Chief Executive Officer, commented, "The first quarter marked the best financial performance from our strategically repositioned portfolio of operations. This milestone reflects the continued health of the U.S. non-residential construction sector, which contributed to strong performances in our Americas Mills and Fabrication segments. We believe the metal margin performance seen over recent quarters highlights the stability of CMC's rebar and long product offerings compared to the broader steel market."
"Strong earnings and working capital management during the quarter allowed us to further de-lever our balance sheet. Over the past 12 months, we have made debt repayments of $173.8 million."
Barbara R. Smith, Chairman of the Board, President and Chief Executive Officer, commented, "The first quarter marked the best financial performance from our strategically repositioned portfolio of operations. This milestone reflects the continued health of the U.S. non-residential construction sector, which contributed to strong performances in our Americas Mills and Fabrication segments. We believe the metal margin performance seen over recent quarters highlights the stability of CMC's rebar and long product offerings compared to the broader steel market."
"Strong earnings and working capital management during the quarter allowed us to further de-lever our balance sheet. Over the past 12 months, we have made debt repayments of $173.8 million."
Outlook
"We expect construction and infrastructure demand to remain resilient," said Ms. Smith. "Customer sentiment and our own fabrication backlog both point to a strong outlook for activity, though our second quarter will be impacted by typical seasonality related to holidays and winter weather conditions affecting construction activity."
"We anticipate metal margin will remain above the historical cycle average, but will experience a decline from first quarter levels. We expect our progress in optimizing our expanded domestic mill network during the first quarter will yield benefits going forward. We anticipate Fabrication will remain profitable, while Recycling should see some benefit from the recent rebound in ferrous scrap prices. We expect challenges to remain for our Polish operations until the current overhang of imports to the European Union unwinds."
"We expect construction and infrastructure demand to remain resilient," said Ms. Smith. "Customer sentiment and our own fabrication backlog both point to a strong outlook for activity, though our second quarter will be impacted by typical seasonality related to holidays and winter weather conditions affecting construction activity."
"We anticipate metal margin will remain above the historical cycle average, but will experience a decline from first quarter levels. We expect our progress in optimizing our expanded domestic mill network during the first quarter will yield benefits going forward. We anticipate Fabrication will remain profitable, while Recycling should see some benefit from the recent rebound in ferrous scrap prices. We expect challenges to remain for our Polish operations until the current overhang of imports to the European Union unwinds."
Commercial Metals Company (NYSE: CMC) stock price history
The image below, obtained from Google, shows the stock price history of Commercial Metals Company (NYSE:CMC) over the last 5 years. And it's been a very volatile but overall a very good time for Commercial Metals Company stockholders. 5 years ago their stock was trading around $14.20 a stock and they are currently trading at $22.12 a stock. That is a very decent return of 55% provided to Commercial Metals Company stockholders over the last 5 years,
The stock of Commercial Metals Company is trading at closer to its 52 week high of $24.04 than it is to its 52 week low of $13.26 which to us is a clear indication that the momentum and sentiment towards Commercial Metals Company's stock is very positive.
The stock of Commercial Metals Company is trading at closer to its 52 week high of $24.04 than it is to its 52 week low of $13.26 which to us is a clear indication that the momentum and sentiment towards Commercial Metals Company's stock is very positive.
Recent coverage of Commercial Metals Company
The extract below shows the latest coverage of Commercial Metals Company as obtained from Zacks.com
Commercial Metals (CMC - Free Report) came out with quarterly earnings of $0.73 per share, beating the Zacks Consensus Estimate of $0.56 per share. This compares to earnings of $0.35 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 30.36%. A quarter ago, it was expected that this manufacturer and recycler of steel and metal products would post earnings of $0.70 per share when it actually produced earnings of $0.76, delivering a surprise of 8.57%.
Over the last four quarters, the company has surpassed consensus EPS estimates four times. Commercial Metals, which belongs to the Zacks Steel - Producers industry, posted revenues of $1.38 billion for the quarter ended November 2019, missing the Zacks Consensus Estimate by 4.22%. This compares to year-ago revenues of $1.28 billion. The company has not been able to beat consensus revenue estimates over the last four quarters.
The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Commercial Metals shares have lost about 0.4% since the beginning of the year versus the S&P 500's gain of 0.1%
Read the full article here
Commercial Metals (CMC - Free Report) came out with quarterly earnings of $0.73 per share, beating the Zacks Consensus Estimate of $0.56 per share. This compares to earnings of $0.35 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 30.36%. A quarter ago, it was expected that this manufacturer and recycler of steel and metal products would post earnings of $0.70 per share when it actually produced earnings of $0.76, delivering a surprise of 8.57%.
Over the last four quarters, the company has surpassed consensus EPS estimates four times. Commercial Metals, which belongs to the Zacks Steel - Producers industry, posted revenues of $1.38 billion for the quarter ended November 2019, missing the Zacks Consensus Estimate by 4.22%. This compares to year-ago revenues of $1.28 billion. The company has not been able to beat consensus revenue estimates over the last four quarters.
The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Commercial Metals shares have lost about 0.4% since the beginning of the year versus the S&P 500's gain of 0.1%
Read the full article here
Commercial Metals Company (NYSE: CMC) latest stock valuation
So what is Commercial Metals Company (NYSE: CMC) stock worth based on the release of their latest earnings report and their outlook provided? Based on their earnings report and the outlook provided our valuation models provide a target (full value) price for Commercial Metals Company of $29.10 a stock. We therefore believe that the stock is undervalued.
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $29.10. So we believe a good entry point into Commercial Metals Company stock would be at $26.20 or below. Since the stock of Commercial Metals Company is trading at well below our suggested entry point we rate the stock of Commercial Metals Company as a buy.
We expect the stock to tick up from current levels to levels closer to our target price (full value price) in coming weeks and months
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $29.10. So we believe a good entry point into Commercial Metals Company stock would be at $26.20 or below. Since the stock of Commercial Metals Company is trading at well below our suggested entry point we rate the stock of Commercial Metals Company as a buy.
We expect the stock to tick up from current levels to levels closer to our target price (full value price) in coming weeks and months
Next earnings release of Commercial Metals Company
It is expected that Commercial Metals Company will release their 2nd quarter 2020 earnings report in early April 2020