Commercial Metals Earnings: Here’s Why Investors are Bidding Up Shares

Commercial Metals Company (NYSE:CMC) delivered a profit yet missed Wall Street’s expectations. The revenue miss is a negative sign to shareholders seeking high growth out of the company. Shares are up 3.67%.

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Commercial Metals Company Earnings Cheat Sheet

Results: Excluding a one-time gain related to the sell of its 11% interest in a Czech Republic joint venture, Commercial Metals earned just 13 cents a share.

Revenue: Decreased 8.01% to $1.8 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: Commercial Metals Company reported adjusted net income of 13 cents per share. By that measure, the company missed the mean analyst estimate of $0.17. It missed the average revenue estimate of $1.89 billion.

Quoting Management: Joe Alvarado, Chairman of the Board, President, and CEO, commented, “Our second fiscal quarter is normally our weakest period of the year due to holiday slowdowns and winter weather conditions curtailing construction activity.  However, there is growing evidence of an emerging recovery in domestic construction end markets, which is encouraging for future quarters.  Our customers remain cautious, and stocking levels are low. Within our segments, we expect our Americas Recycling segment to benefit from scrap price improvements, which historically occur during our second fiscal quarter.

We believe the scrap price improvements will likely result in near term downstream margin compression in our Americas Mills and Fabrication segments.  We believe our International Mill segment will remain challenged by deteriorating conditions in the Euro zone.  Further, we expect the International Marketing and Distribution segment to exhibit continued softness until there is more clarity around the economic direction in both domestic and international markets.  In response to these near term headwinds, we will take advantage of the holidays and the winter weather conditions to adjust our operating rates and our inventories while retaining full flexibility to respond quickly to any upturn in our markets.”

Key Stats:

Revenue decreased 4.16% from $1.88 billion in the previous quarter. Net income increased 64.46% from $30.22 million in the previous quarter.

Looking Forward: Analysts have a more negative outlook for the company’s next-quarter performance. Over the past three months, the average estimate for next quarter’s earnings has fallen from a profit of $0.31 to a profit $0.23. For the current year, the average estimate has moved down from a profit of $1.47 to a profit of $1.16 over the last ninety days.

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(Company fundamentals provided by Xignite Financials.)

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