JP Morgan Lowers Estimates, Raises PT On Commercial Metals

JP Morgan has published a research report on Commercial Metals CMC as the company is showing weakness in its near-term EPS. In the report, JP Morgan writes "Despite lowering our EPS estimates for next quarter and FY2011, we are lifting our target price, as we expect the stock (and steel stocks in general) will look through near-term margin pressures caused by steel price hikes lagging scrap costs. This mentality materialized after 4Q10 quarterly updates from NUE & STLD last week and also played out after CMC's earnings release. In addition to improving sentiment and steel prices, we believe valuation has benefited from the disclosure that Carl Icahn now owns a 2% stake in the company. Since this position was disclosed in late October, CMC's stock is up 24% relative to 30% for the average integrated mill, which have more leverage to a recovery. The combination of this recent appreciation, challenging fabrication markets, and inconsistent profitability from international mills merits a Neutral rating, in our view." JP Morgan maintains its Neutral rating and has raised the price target from $14.50 to $17. Commercial Metals closed yesterday at $17.54.