Why Commercial Metals Stock Is Falling Today

Commercial Metals Company CMC reported fourth-quarter FY23 sales of $2.209 billion, which beat the consensus of $2.180 billion. 

Revenues fell 8.2% Y/Y. Sales slumped as lower new contract awards drove a modest year-over-year reduction in the volume and value of CMC's downstream backlog. 

Demand from industrial end markets, which is important for merchant products, was mixed, with certain applications experiencing slower activity compared to past quarters.

Adjusted EPS of $1.69 missed the consensus of $1.81.

The average selling price for steel products decreased $172 per ton compared to the fourth quarter of fiscal 2022, while the cost of scrap utilized declined $49 per ton, resulting in a year-over-year decrease in steel products margin over scrap of $123 per ton. 

Europe end market conditions weakened during the quarter, as Polish construction activity decelerated and industrial production across Central Europe remained muted. 

As of August 31, 2023, cash and cash equivalents totaled $592.3 million, with available liquidity of $1.6 billion.

Core EBITDA decreased to $340.03 million from $419.02 million a year ago.

Dividend: On October 10, 2023, the board of directors declared a quarterly dividend of $0.16 per share of CMC common stock payable on November 9, 2023, to stockholders of record on October 26, 2023. 

Outlook: CMC expects weaker Q1 compared to Q4 on seasonally lower shipments, steel product margin compression in North America, and the continuation of challenging market conditions in Europe. 

"During the first quarter, we anticipate that our Europe operations will receive approximately $60 million from two large government rebate programs. The first is an annual CO2 credit estimated at $25 million, up from the $9.5 million received last year. The second is structured as a reimbursement by the Polish government for elevated energy costs incurred during the European energy crisis. Proceeds from this program are expected to be $35 million, and are calculated based on the magnitude of energy cost inflation in calendar year 2023 relative to the prior year baseline. These rebates are expected to drive a sequential improvement in Europe segment adjusted EBITDA," said Chief Executive Officer Peter Matt.

Price Action: CMC shares are trading lower by 5.67% to $45.60 premarket on the last check Thursday.