Citi Gives An Update On Commercial Metals Co Following Recent Earnings Report

After adjusting its model of Commercial Metals Co CMC for lower than expected F2Q results and guidance, Citi is lowering its FY11 estimate to $0.15 from $0.71 and FY12 to $1.70 from $2.05, no change to its FY13 estimate of $2.20. While the pace of earnings recovery has trailed consensus and our expectations, results have shown two quarters of YoY improvement. Guidance suggests further recovery in the coming quarter. Citi still sees CMC trading at an attractive valuation relative to our mid-cycle earnings estimate of $2.35/sh, which it believes is possible in FY2013 should construction spending recover from cyclical lows. The infrastructure market remains stronger than commercial construction, but demand has been more active in education, healthcare and oil/gas projects. Management dispatched technical teams to Croatia to assist in improving operating results and expects losses to narrow through the remainder of FY11, but losses could persist into FY12. Citi has a $20 PT and Buy rating on CMC CMC closed Tuesday at $15.69