Why Commercial Metals Shares Are Surging Today

Commercial Metals Company CMC shares are trading higher after the company reported third-quarter FY24 net sales of $2.078 billion, beating the consensus of $2.034 billion.

The company stated that fundamentals remain strong in North American markets, supporting stable to modestly improving steel product margins, healthy shipment levels, and steady downstream backlog volumes.

Commercial Metals reported that the Europe Steel Group achieved nearly breakeven performance on an adjusted EBITDA basis in the third quarter. Market conditions remained stable compared to the previous quarter, with slight increases in finished steel pricing and product margins.

The Europe Steel Group’s average selling price increased by $8 per ton from the second quarter of fiscal 2024.

Core EBITDA decreased to $256.1 million from $384.5 million in the prior year quarter, with a core EBITDA margin of 12.3%.

Adjusted EPS was $1.02, which is in line with the consensus.

As of February 29, 2024, cash and cash equivalents totaled $698.3 million, with available liquidity of about $1.5 billion.

The company’s net cash flows from operating activities for the first nine months totaled $547.9 million.

In the quarter, CMC repurchased stock worth $51.8 million. As of May-end, $458.6 million shares remained available under the current share repurchase authorization.

Dividend: On June 19, 2024, the board declared a quarterly dividend of $0.18 per share (+13% Y/Y), payable on July 10, to stockholders of record on July 1.

Peter Matt, President and Chief Executive Officer, stated, “We expect consolidated financial results in our fiscal fourth quarter to be consistent with third quarter levels.  Finished steel shipments within the North America Steel Group are anticipated to be flat on a sequential basis, while adjusted EBITDA margin should remain relatively stable.”

“Adjusted EBITDA for our Europe Steel Group is likely to continue the quarter-to-quarter improvement trend despite market conditions that are expected to remain challenging.  Financial results for the Emerging Businesses Group should improve modestly, driven by steady underlying market fundamentals and a healthy order book.”

Investors can gain exposure to the stock via VanEck Steel ETF SLX and SPDR S&P Metals & Mining ETF XME.

Price Action: CMC shares are up 5.85% at $53.71 at the last check Thursday.