On Friday, BofA Securities reiterated its Buy rating on Commercial Metals Company (NYSE:CMC) with a steady stock price target of $70.00. The firm's analysis indicated that Commercial Metals' fiscal third quarter results for 2024 aligned with expectations from Bloomberg consensus and BofA's own estimates, while slightly surpassing those from Visible Alpha.
Commercial Metals reported that its North America steel segment performed better than anticipated, thanks to an increase in downstream shipments. However, this was somewhat balanced by the slightly weaker results in the company's Europe and Emerging Businesses Group segments.
Looking ahead to the fiscal fourth quarter of 2024, Commercial Metals anticipates its performance to mirror the third quarter, with consistent shipments and margins in North America and modest improvements in Europe and the Emerging Businesses Group.
Despite the fourth quarter guidance being somewhat conservative compared to consensus expectations, the company has observed positive signs of growing infrastructure activity. This trend is expected to gain traction in the subsequent quarters. BofA Securities highlights Commercial Metals as a primary beneficiary among U.S. steel producers from the anticipated increase in U.S. infrastructure spending over the coming years.
Supporting this outlook, the American Road & Transportation Builders Association (ARTBA) reported that transportation contract awards have risen by 13% year-over-year. Additionally, there is a significant amount of unallocated state funds that are projected to contribute to the sector's growth.
BofA Securities also notes that Commercial Metals may announce substantial self-help measures at a possible investor day in 2024, which could serve as a major catalyst for the stock. The firm's stance remains a Buy on the basis of these factors.
In other recent news, Commercial Metals Company reported robust earnings for the second and third quarters of fiscal 2024. The company's core EBITDA of $256 million for Q3 slightly surpassed both BMO (TSX:BMO) Capital's and consensus estimates due to stronger shipments and pricing.
Still, shipment volumes were noted to have dropped by 3% year-over-year, despite the operational ramp-up of the new Arizona mill. Commercial Metals Company has provided guidance suggesting a stable core EBITDA for the fourth fiscal quarter, approximately $256 million, which is below the consensus estimate of $276 million.
The company's commitment to shareholder returns was underscored by an increased quarterly dividend and an enhanced share repurchase authorization by $500 million. Despite uncertainties in the West Coast rebar market, the company anticipates monthly EBITDA breakeven by the fourth fiscal quarter, supported by robust construction activity in North America.
Both Citi and BMO Capital maintained their neutral stance on Commercial Metals Company, with a steady price target of $60.00. In line with these developments, the analysts expect the stock to perform in line with the market.
InvestingPro Insights
Commercial Metals Company (NYSE:CMC) presents a compelling picture for investors, with recent data from InvestingPro underscoring some key strengths. With a market capitalization of $6.06 billion and a robust P/E ratio of 10.55, the company's financial health appears solid. Notably, its P/E ratio has adjusted to an even more attractive 8.85 over the last twelve months as of Q2 2024, suggesting a better valuation compared to earnings.
Moreover, the company's commitment to shareholder returns is evident, as it has not only maintained but also increased its dividend for 3 consecutive years, with a notable dividend growth of 12.5% over the last twelve months. This aligns with the InvestingPro Tips that highlight a high shareholder yield and the fact that management has been actively buying back shares.
Despite a slight revenue decline of 8.32% over the last twelve months as of Q2 2024, the company's fundamentals remain strong. Commercial Metals boasts a gross profit margin of 19.07%, and its cash flows are more than sufficient to cover interest payments, which is a reassuring sign for investors concerned about financial stability. The company's stock is known for low price volatility, which might appeal to investors looking for stable returns.
For those considering an investment in Commercial Metals, there are additional InvestingPro Tips available that could provide more in-depth analysis. To access these, investors can visit the dedicated InvestingPro page for CMC. By using the coupon code PRONEWS24, investors can enjoy an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking even more valuable insights. With 13 more tips available on InvestingPro, investors have a wealth of information at their fingertips to make informed decisions.
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