Commercial Metals Company (CMC – Free Report) reported adjusted earnings per share (EPS) of $2.24 for first-quarter fiscal 2023 (ended Nov 30, 2022), beating the Zacks Consensus Estimate of $1.99. The bottom line rose 38.3% from the prior-year quarter’s earnings per share of $1.62.
Including one-time items, CMC logged an EPS of $2.20 in the quarter compared with the prior-year quarter’s $1.90.
Net sales in the reported quarter were $2,227.3 million, up 12.4% from the year-ago quarter’s $1,981.8 million. The reported figure surpassed the Zacks Consensus Estimate of $2,164.5 million. The results were driven by growth in North America downstream backlog and project bidding volumes, and ongoing strategic actions.
The cost of goods sold in the fiscal first quarter was up 8.4% from the year-ago quarter to $1,719.4 million. The gross profit was up 28.3% from the year-ago quarter to $508 million. The core EBITDA was $425 million in the fiscal first quarter, up 30% from the year-ago quarter.
The North America segment generated net sales of $1,816.9 million in the first quarter of fiscal 2023 compared with $1,653.6 million in the prior-year quarter. The segment registered an adjusted EBITDA of $378 million compared with the year-earlier quarter’s $268.5 million. The increase was aided by expanded margins over scrap cost on shipments of steel and downstream products.
The Europe segment’s revenues were $406.5 million, gaining 23.4% from the year-ago quarter. Adjusted EBITDA was $64.5 million in the quarter under review, down from the year-ago quarter’s $79.8 million. The decline was caused by a slightly lower margin over scrap costs, higher energy costs, lower receipt of CO2 energy credit, and the impacts of the weakening of the Polish Zloty in relation to the US dollar.
Despite the volatile market conditions, Europe operations utilized its relative cost position to increase market share and ship large volumes.
Commercial Metals reported cash and cash equivalents of $582 million as of Nov 30, 2022, compared with $415 million as of Nov 30, 2021. CMC’s long-term debt was $1,093 million at the end of first-quarter fiscal 2023 compared with $1,007 million at the first-quarter fiscal 2022 end. Cash generated from operating activities in the first three months of fiscal 2023 was $372 million compared with $26 million last year.
CMC repurchased shares worth $1.3 million in the quarter under review. It returned $49.1 million of cash to shareholders in the fiscal first quarter. As of Nov 30, 2022, $139 million remained under the current share buyback authorization.
Commercial Metals noted that downstream backlog volumes and average pricing are at historical highs. It is experiencing sustained robust demand for each of its major product lines in North America. In the upcoming quarter, North America volumes are expected to be aided by current and new reshoring projects, and rising levels of infrastructure spending.
However, economic uncertainties are projected to impact volumes in Europe. With the completion of Arizona 2 and the addition of Tensar, the company expects to be better positioned to capitalize on the emerging structural economic trends.
CMC believes that its favorable relative cost position in Europe will benefit the financial performance of the Europe segment.
Finished steel volumes in North America and Europe are forecast to follow typical seasonal patterns in the fiscal second quarter. Volumes have historically declined from the first-quarter levels due to weather and holidays.
The company expects scrap margins in North America and Europe to remain elevated from the historical levels in the second fiscal quarter. However, it expects the margin to decline from the first quarter.
Shares of Commercial Metals have gained 40.6% in the past year compared to the industry’s growth of 2.2%.
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Zacks Rank & Other Stocks to Consider
Commercial Metals currently sports a Zacks Rank #1 (Strong Buy).
Some other top-ranked stocks from the basic materials space are CalMaine Foods, Inc. (CALM – Free Report) , Reliance Steel & Aluminum Co. (RS – Free Report) and Franco-Nevada Corporation (FNV – Free Report) . CALM and RS currently flaunt a Zacks Rank #1 and FNV carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CalMaine Foods’ fiscal 2023 earnings per share is pegged at $14.08, suggesting 417.7% growth from the year-ago reported figure. Earnings estimates have moved 73.8% north in the past 60 days. CALM has a trailing four-quarter earnings surprise of 15.3%, on average. Its shares have gained 31.4% in the past year.
The Zacks Consensus Estimate for Reliance Steel’s earnings per share is pegged at $28.65 for 2022, indicating a year-over-year growth rate of 29.5%. Earnings estimates have been revised 0.2% upward in the past 60 days. RS has a trailing four-quarter average surprise of 13.6%, on average. It has gained 26.7% in a year.
The Zacks Consensus Estimate for Franco-Nevada’s 2022 earnings per share is pegged at $3.67, suggesting 4.3% growth from the year-ago reported figure. Earnings estimates have moved 4.2% north in the past 60 days. FNV has a trailing four-quarter earnings surprise of 1.3%, on average. Its shares have gained 8.1% in the past year.
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