Commercial Metals Tops Q1 Earnings Views; CMC Stock Rises Near Buy Point

By JED GRAHAM

Commercial Metals posted fiscal first-quarter earnings on Monday that trounced estimates as strong margins helped overcome light revenue. CMC stock, a member of the flagship IBD 50 list, rose toward a buy point in premarket action.

The Irving, Texas-based steelmaker sounded upbeat about the outlook. "We continue to anticipate strong fiscal year 2022 financial and operational performances. Volumes should remain solid, supported by a growing construction backlog in North America, as well as broad strength across key end markets in both North America and Europe."

She added that Q2 margins should be "consistent with, or slightly above, recent levels."

CMC Earnings

CMC reported Q1 EPS of $1.62 for the quarter ended in November, up 179% from its year-ago profit of 58 cents. Results blew past estimates by 32 cents, according to Zacks Investment Research. That excludes a tax benefit that boosted EPS to $1.90.

Revenue jumped 42% to $1.98 billion, shy of views for $2.06 billion. CMC noted increased margins for steel products, as well as rebar and other raw materials in North America. European results benefited from increased margin over scrap costs, as well as the receipt of a $15.5 million energy.

CMC highlighted several indicators that point to continued strength. "Downstream bid volumes, a key indicator of the construction project pipeline, increased meaningfully from a year ago, while new contract awards and backlog also experienced growth."

CMC Stock

Premarket action showed CMC stock up 3.6% to 36.90 early Monday. CMC shares are trying to regain a 36.96 buy point from a cup base, following volatile action last week. The buy point from a 6-week cup base can be seen on a weekly MarketSmith chart.

Despite some whipsaw action last week, CMC stock impressively found support at its 21-day moving average. The stock's relative strength line shows it has been keeping pace with the S&P 500 since March, though the line is just below a peak.

CMC stock has an excellent 96 IBD Composite Rating, a single rating that combines technical and fundamental factors.


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