Commercial Metals Company (CMC) on Q1 2021 Results - Earnings Call Transcript

Operator: Hello, and welcome everyone to the First Quarter Fiscal 2021 Earnings Call for Commercial Metals Company. Today's call is being recorded. After the Company's remarks, we will have a question-and-answer session and we’ll have a few instructions at that time. I would like to remind all participants that during the course of this conference call, the Company will make statements that provide information other than historical information and will include expectations regarding economic conditions, the impact of COVID-19, effects of legislation, U.S. steel import levels, U.S. construction activity, demand for finished steel products, the Company's future operations, the Company's future results of operations and capital spending. Barbara Smith: Good morning, and welcome to our first quarter earnings conference call. I'd like to wish everyone on the line a Happy New Year and extend my thanks to CMC's 11,500 employees for another great quarter. I'll begin the call with brief comments on our first quarter results before providing some color regarding the current market environment and how CMC is positioned to succeed. I'll also give an update on CMC's strategic growth initiatives. Paul Lawrence will then cover the quarter's financial information in more detail, and I will conclude our prepared remarks with a discussion of our outlook for the second quarter of fiscal 2021, after which we will open the call to question. As announced in our earnings release this morning, we reported fiscal first quarter 2021 earnings from continuing operations of $63.9 million or $0.53 per diluted share on net sales of $1.4 billion. Excluding the impact of certain charges which Paul will cover in more detail, our adjusted earnings from continuing operations were $69.8 million or $0.58 per diluted share. CMC generated core EBITDA of $156.6 million, marking the seventh consecutive quarter near or above the $150 million level. This record underscores not only our company's enhanced earnings capability compared to past periods, but also the stability provided by our integrated value chain. Activity levels in CMC's core end markets remained strong during the first quarter, leading to an increase in the company's finished steel shipments compared to a year ago. Paul Lawrence: Thank you, Barbara. And good morning to everyone joining us on the call today. Today, we reported earnings from continuing operations of $63.9 million or $0.53 per diluted share, compared to earnings from continuing operations of $82.8 million or $0.69 per diluted share in the first quarter of fiscal 2020. Ultimate quarter include net after tax charges of $5.9 million related primarily to facility closure and asset impairment expenses at our Rancho Cucamonga steel California operations. As Barbara mentioned, production ended in late December, excluding these and other one time expenses, adjusted earnings from continuing operations were $69.8 million or $0.58 per diluted share. Our core EBITDA from continuing operations was $156.6 million for the first quarter of 2021, a decrease of 10% from the near record level of $174.4 million reported first quarter of 2020. Slide 5 of the supplemental earnings call slides available on our website shows the stability of our core EBITDA on a per ton of finished steel ship basis over the course of the pandemic. Now, I will review results of segments for the first quarter of fiscal 2021. North America segment recorded adjusted EBITDA of $155.6 million for the quarter, compared to adjusted EBITDA of $174.7 million in the same period last year. Largest driver of this reduction with lower margins over scrap costs on finished products. Margins for both steel products, downstream products were impacted by lower average selling prices compared to a year ago against higher scrap input costs. Selling prices for steel products from our mills decreased by $14 per ton on a year-over-year basis, but did sequentially increase due to price increase announcements that became effective in the latter half of the quarter. These price increases which Barbara mentioned earlier occurred largely in late November and have continued into January. Impact of these increases will be realized by the end of the second quarter. Average selling price of downstream products declined by $42 per ton from a year ago as a result of the mix of work shipped as well as the impact of the high price projects booked in the immediate aftermath of Section 232 rolling off our backlog. Barbara Smith: Thank you, Paul. We expect finished steel shipments in the second quarter to follow typical seasonal trends in both North America and Europe. As a reminder, volumes tend to decline mid to high single digits from Q1 to q2 as construction activity is slowed this time of year with the holidays and winter weather. Shipments of steel and downstream products in North America should be supported by our construction backlog. Manufacturing sectors of both the US and Central Europe appear to signal continued recovery, which we expect to benefit volumes of merchant bar in both markets, as well as our wire rod product in Europe. We anticipate margin pressure in North America during the quarter as a result of rapidly rising scrap costs and the timing lag on announced price increases. CMC is well positioned to navigate market volatility and uncertainty. This gives us confidence that over the long term, our company is structured to earn an average EBITDA of at least $540 million per year through the cycle as we shared with you during our Investor Day, adding the growth projects that are currently underway; we believe we can grow our through the cycle EBITDA to $675 million over the next three to four years. Once again, I would like to thank all of the CMC employees for delivering another outstanding quarter of performance. We will now open the call to questions. Operator: The first question today comes from Chris Terry of Deutsche Bank. ChrisTerry: Hi, Barbara and Paul. Hope you both well. I wanted to ask you a question just around the infrastructure bill. I think previously you talked about the rebar market potentially benefiting at 1 million to 1.4 million tons a year in that line. Just wanted your thoughts if we are to get an improvement in the infrastructure bill, how long in your experience something like that might take to flow through the numbers and just checking that 1 million to 1.4 million is the right range. Thank you. BarbaraSmith: Thank you, Chris, and Happy New Year. We're still confident in that range of 1 to 1.4. I think we'll have to see what the priorities are of the new administration. But certainly, infrastructure does seem to be one of the areas of focus early on in the administration's term. So, we would be highly encouraged if that move forward. ChrisTerry: Okay, now just in terms of the timing of how that might come through, I assume to now just on your experience on backlogs and is that sort of 2022 or how long would something like that take to flow through the economy? BarbaraSmith: Yes, I apologize. I didn't hear second half of your question; normally there's a 12 to 18 month lag, I would say given discussions with our customers, there's certainly enthusiasm to start projects, and so we're just really watching a number of things and hoping for the continued recovery in the economy and no setbacks with COVID. But I think if the infrastructure bill is approved in this first year, we would start to see things in the following fiscal year. ChrisTerry: Okay, thanks. And just a follow up on the mechanics of the different parts of your business. Just checking the fabrication business is still sort of that 9 to 12 months lag on pricing, sort of how you think about that business, and then scrap still flows through on 30 to 45 days lag into the mills division, just wanted to think about some of the modeling.6 BarbaraSmith: Yes, I think that the 9 to 12 months is a good average. More recently, we've seen more short duration and spot business in some of our fab business, which is good because it turns a little bit -- a little bit faster. You don't have as much raw material exposure, but those are good averages for both fab turnover and scrap turnover. Operator: Next question comes from Curt Woodworth of Credit Suisse. CurtWoodworth: Yes, hey, good morning, Barbara and Paul. I know there's been a flurry of price hikes in the last three months and scrap pricing continues to go up pretty dramatically. Just wondering you talked about how you expect to have all the price hikes fully in place by the end of 2Q, and obviously scrap cycles into the business through COGS, you know quickly. So can you give us a sense on a, what type of metal spread compression you could be facing this quarter? And then when I look at spot rebar and metal bolting, and it's about 755. So, it's up roughly 160 over the past three months, which is somewhat equivalent to what the scrap market has done, if we include about an $80 per ton rise this month, so would you say that, as it stands today, the price hikes you've announced by the end of 2Q, assuming scrap stays where it is right now, you would be roughly back to where you were on metal spread? BarbaraSmith: Curt, we don't give any specific commentary on pricing for obvious reasons, but certainly there's good transparency on the changes in raw material price, and there's been good transparency on announced price movements, and assuming that those are accepted in the marketplace, we're encouraged by that and are obviously aimed to optimize margins as best we can. CurtWoodworth: Okay, maybe some another way in terms of the lag on the announced price hikes, so what would a typical lag be between your contract structure, then the timing, in terms of working through the inventory? Like if you announce a price hike today, would that kind of start to flow through on about a 60 day lag or how should we think about kind of the timing mismatch, if you will, between scrapping more fluid and pricing taking a little bit longer to effectuate? BarbaraSmith: Yes, generally speaking and every announcement is different based on the conditions in the marketplace, but generally speaking if there's an announcement today and customers are protected for two to four weeks as a scrap flowing through like it does, and those are guidelines, there are a lot of factors and every action by everyone, every market participant is slightly different. CurtWoodworth: Okay. And then just a follow up on -- you talked about the backlog has picked up a little bit more recently, maybe with certainly around the election or various things. Can you talk about what sectors or the backlight -- where you're seeing activity? Is it more on the infrastructure side relative to non res, and you mentioned residential obviously doing better, but I don't think you have that much exposure to residential, if you could just remind me on what that exposure is. And that's it. Thank you. BarbaraSmith: Well, backlog as everyone can appreciate, when the pandemic literally shut the economies down around the world, that took everything to a screeching halt. And so, there was a pause in loading and bidding as everyone's search to understand things would go from there. And as time has gone on as we all know that our business as an essential business has been able to do upgrades effectively throughout this, and I think construction activity in general has been able to move forward without any major disruptions. So, it then comes back to a lot of other uncertainty factors and people tend to be more hesitant to work when they don't have --your policy matters going forward, long story short after some decline in backlog, we do believe that the backlog is stabilizing. We are encouraged by recent quoting and booking activity. We know from our customers, there is good activity or good projects out there. And we've seen some really interesting ones over the last eight weeks that are finally coming to market after some months of hesitation or just pause to understand the economic fallout from COVID. And our backlog well sits around 60%, private and public. There was an infrastructure bill of the magnitude that the House and Senate have talked about that could start to shift over time and be more heavily weighted towards infrastructure, but I should remind folks there have been a lot of population movements throughout this past year, and that’s where we do see some market strength as a result of those trends. And that's probably going to continue and with that comes a lot of infrastructure that will follow on from the strength in residential. I should remind our listeners that we do now with the addition of the recent acquisition, we do have wire rod exposure, not only in Europe, but also here in the US, and there is a good amount of wire rods that go into residential. So, we have a little more exposure there than maybe what you would think of historically, again, with a strong residential follows a non-residential, and so that's a very encouraging sign for us going forward. Operator: My next question comes from Seth Rosenfeld of Exane BNP Paribas. SethRosenfeld: Good afternoon. Thanks for taking our questions today. If I may, I have first a follow up question your recent comments on MBQ. And then I wanted to come back to working capital, please. When it comes to MBQ, can you give us a sense on what's driving these particularly strong volumes in both the US and in Europe? To what extent you attribute this to market share gains versus some weaker competitors? And inventory restocking after the summer trough by your trader customers? And more something more fundamental in real demand trends, if we can start there, please. BarbaraSmith: Okay, thank you, Seth. Happy New Year. The MBQ has been, as we've highlighted is an important product. It's always been in our portfolio. We very much appreciate our merchant customers. And it's not a simple answer; we have invested in providing a broader product range. And so that opens up opportunities for us. Clearly, there's been inventory restocking, as a lot of the manufacturing sector was shut down for a period of time in the early stages of a pandemic. And then I think service centers have been very judicious and very conservative in managing their working capital, understandably so. And given the market, volatility and uncertainty, it's a combination of things. I can also remind you that in the US, there was one mill that was shut down over the past period of time and so certainly that opened up other opportunities for us as well. SethRosenfeld: Just to clarify is there anything with these volume numbers that you think is uniquely or unsustainably boosted by restocking? Is this a one right we should take moving forward for MBQ definitely the bottom line? BarbaraSmith: And I don't think so. I think that I don't believe the manufacturing sector is fully ramped up to normal operations. I know there are still shortages throughout the supply chain. You're in the market buying anything, you certainly will be aware of some of the shortages throughout the supply chain. But so yes maybe there's some short term settling out of it. But I still think there's -- and our data would indicate that there's going to be continued demand growth in 2021 as all of the sectors of the economy recover. SethRosenfeld: Okay, that's very clear. And if I can ask a follow up question, please on the guidance for working capital, please, obviously, a big use of cash in Q1, and the guidance for significant investment in Q2, can you provide any framework for the scale of investment we would expect? And then is there any reason to expect a full year investment this year, or assuming some moderation of trends would we expect to release in the back half, please? PaulLawrence: First off and good morning. As far as our working capital in the first quarter, as you indicated, you saw a normal use of cash for us. Typically, the first quarter includes various year end related payouts that occur in the in the first quarter, as well as some accrued interest and other activities. And so the normal flow is for us is an outflow in the first quarter and then holding everything else constant, we recover that working capital throughout the balance of the year. In the current year, obviously, in addition to the normal cycles, we have the impact of the inflationary pressures, both on the inventory side and the receivable side. And really, that's clearly in a cyclical business, that's a temporary investment and really depends on your outlook for the cycle of costs and where you project the scrap prices to go and possibly recover. But the positive thing from our perspective we've got $1.1 billion of liquidity through the judicious cash balance sheet management that we've got. And so, we view this as part of the normal management of the business and we do see overall that we continue to look to optimize the business which includes long term having working capital reductions in a day's measure. But in today's environment as a result of the rising prices, clearly we will see an investment in cash here in the second quarter. Operator: Our next question comes from Timna Tanners of Bank of America. TimnaTanners: Yes. Hey, good morning, Barbara and Paul, Happy New Year. I just want to clarify so on the comments about the scrap margin or descriptive pressure on margins from scrap. If we believe this could be the year of scrap and scrap is off to a sharp -- sharply higher start for the year and into your February quarter. Is your guidance more commentary on like the temporary timing of passing it all through? Or is there any reason to believe that this is the margin squeeze that we could see beyond like the short term? So I'm just really asking about sharply higher scrap prices maybe it's just a question of timing and how you think about that adjustment for your steel business and then I want to ask something about steel fabrication on those lines as well. BarbaraSmith: Timna, we really think is this -- we are trying to signal the timing lag, very encouraged by the ability of which is historically been the case. There are customers understand as raw material prices change that there are adjustments to finished product pricing. So right now, it's really a question of the timing between that movements and price changes. And imports are relatively at bay. And that's another factor as that plays into it and so that best to us that we're going to be able to recover those raw material price changes as they occur. TimnaTanners: Okay, that makes sense. So just be because of the unusually sharp increase and probably conservatism into February unknowns there it makes sense to be a bit conservative. But along those lines, I'm trying to understand how to think about the fabricating business. So if I understand correctly, the inputs, the rebar that goes into that is priced on like a quarter lag. And then the finished product is priced on like 9 to 12 months lag. So if we think about the rebar price inflation for now, against what we know, a year ago, is that that imply like a near-term margin squeeze until any adjustments can be made on the selling price? Or can you just guide us how to think about that? I believe you talked about it, Paul talked about it and cautioned on it, but I just want to make sure I understood that guidance. BarbaraSmith: Yes. So I'd make the following remarks. And Paul can certainly add color if he'd like, just as a reminder, first and foremost, generally, higher prices are beneficial to the business overall, save the lags that we spoke of. So we are encouraged by the higher finished goods prices that we're seeing in the marketplace. I also want to remind everyone that that on the raw material side, when raw material prices move higher, that creates a nice opportunity in our recycling side of the business to improve margins, which helps to offset and buffer the temporary impact on the other side of the coin, which is the fab side that you alluded to Timna. And so yes, there is going to be some temporary adjustments in fab as fab contracts adjust to the higher raw material prices. But I'm encouraged that not only is the fab backlog stabilized and started to build again, but also I think that we're going to fab prices begin to adjust to these changes in raw material prices. We try to read the very judicious in looking projects when you have this phenomenon going on. And but we've been at this for a long time. And there's -- those offsetting factors between recycling benefit and temporary fab at fab in fact. PaulLawrence: The only thing I would add, Timna, if you look at where the margin is on our downstream products over scrap here in this most recent quarter, it is still at and comparison to historical levels elevated margins. And so while we will see temporary squeezes, as Barbara has outlined, we're starting from a place of elevated margins, which will mitigate the impact somewhat in comparison to some prior cycles. TimnaTanners: Oh, no doubt, I just want to make sure I understand. So the recycling business benefits on higher scrap prices, the steel business would hope to offset higher scrap with higher steel and maintain a solid if not better margin. And on the fab business, there's a bit of an offset and just wanted to clarify unless there was something that was missing on an ability to pass through prices differently than in the past. Operator: The next question comes from Andreas Bokkenheuser of UBS. AndreasBokkenheuser: Thank you very much. Happy New Year, everyone. Just a quick question on kind of the order book this year. So fully understand the backlog. And you were mentioning how residents are kind of sensitive on risk and so on so forth. When we look at some of the leading indicators like non res start, and the ABI and so on, it would suggest that we could actually see pressure on contraction steel demand this year. But from what I'm taking away from the poll is that you're pretty comfortable with your new order book. So how should we kind of think about it overall, and you effectively capturing market share? Is that kind of where the bulk of your volume growth is coming from this year in a potentially shrinking market, or do you think that looking at the ABI, looking at non residential construction starts, they're just not good indicators of how the market is going to play out this year. How should we think about that? BarbaraSmith: Yes, I think we're managing a portfolio of products and while certainly rebar is a very, very key component of that, we do have these other products that are not tied to ABI and other things. We like to look at Portland Cement, and cement consumption, because cement consumption is more correlated to rebar consumption than just ABI or non res, because there are a lot of other uses of rebar outside of just non res, certainly non res is important. And Portland Cement also has a very, very good track record of forecast accuracy in Portland Cement, over this past year, during the pandemic has candidly continued to improve or increase their projections going into 2021. Now factoring in all of the more current economic data and Portland cement is showing a modest increase in cement consumption year-over-year. So that gives us encouragement along with all the other factors that we are watching. PaulLawrence: One point I would add, Andreas, is geographic spread as well you look at where we're predominantly located in the Sunbelt areas. And those are clearly the strongest markets from a non res perspective, clear; the Northeast is weak and has been weak now for a number of years. Those often have some elevated impacts to the overall numbers versus our markets. AndreasBokkenheuser: That's very clear. That makes a lot of sense. And one follow up on scrap, if I may, obviously we've seen the headlines about China kind of reopening their doors for imported scrap, I'm sure you saw it as well. How do you kind of think about that? Is this -- do you think this is going to be a challenge in terms of your cost China starts tightening the global scrap market and each post US scrap yard kind of exporting more scrap into the world? Or is this an opportunity for you to potentially manage your finished yield price at a higher level and kind of protect your spreads if the global scrap market tight? That's my follow up? That's all the questions I have. BarbaraSmith: Thank you, Andreas. As I said earlier, generally speaking, higher raw material prices, higher finished good prices lead to much improved results in our business. So we're not certainly discouraged by that. I think we also have a business model that's designed to flourish. Because we know that raw materials also fluctuate, fluctuate within a year, and that can fluctuate certainly year-to-year. So we have a very flexible business model, unlike other products in the steel value chain that have longer lags in order to adjust for raw material pricing, have a relatively short lag in that regard. And so we'll see. Certainly, we're studying the current phenomena. And I think, just like you have a number of mills that were down for a period of time this past year, and they are coming back online as industrial activity and economies begin to heal. I think you have a similar situation that's occurring in China and Asia and other places around the world. So we will remain very nimble and flexible to adjust to. Operator: The next question comes from Phil Gibbs of KeyBanc Capital Markets. PhilGibbs: Good morning. Happy New Year. This first question for me, Barbara, I think you mentioned that backlogs on the downstream side domestically are starting to stabilize. They had pulled back a little bit post election. Where do you think we are year-on-year in terms of downstream US backlogs? BarbaraSmith: Yes. I don't think the pullback was election related so I think it was just really the pandemic. So that's been slowly healing as time goes on. And we'll see what happens in the coming months in terms of our recent uptick in COVID cases that I think everybody's learning to live within that environment. And I don't think that we'll see the pullback in industrials and other activities, like we saw back in March of last year, the backlogs down a little bit, still single digits, but just encouraged that it stabilizing, and we do see so much more positive economic activity today than four months ago, six months ago. I would also add, I think I mentioned it earlier that in some parts of the business, our backlog is shorter duration, which is a good thing for us because it cycles through quicker and don't have to act on that raw material and our price, not as exacerbated as when you fill up with a lot of long duration projects. PhilGibbs: Thank you. And as we look at your conversion costs, you'd pointed to the quarter being very solid in terms of your execution. Any way to isolate how much that benefited you on an absolute basis, year-on-year, relative to one 1Q, 2020? Are we talking $5 million, $15 million? I'm just trying to get a sense of how much you've been able to optimize the business just in the last 12 months. PaulLawrence: If you take a look at the controllable costs, Phil, which is sort of what we outline is everything between what we receive from the scale through to the fab locations outside of scrap, we have seen a significant reduction in those that are -- that is meaningful. It's certainly in the 10 plus million range of what we've achieved over time. PhilGibbs: Thank you. And then lastly, if I could, on your margins, I think you had said on the US business on the mill side margins were starting to stabilize to improve later in the quarter as you push through higher pricing, obviously, you talked about several successive rounds of increases. And then you're saying margins are bottoming in Europe, and maybe you've got some fab pressures that you talked about. So at the end of the day, it seems to me like seasonally speaking, you pointed to the volumes being down, but it sounds like spreads could be reasonably stable given all the puts and takes; it just depends what type of business we're talking about within your portfolio. Is that fair? BarbaraSmith: I think we'll see where things go. It's early in the quarter. But I think that the margins, they stabilize at the end of the quarter, but you still got to push through raw material and the lag effect of price changes still. So I think to recover back to a stable margin by the end of the quarter is probably a realistic expectation but no doubt there's going to be pressure on the margin within the quarter. But very encouraged by markets, escalations in raw material prices. We're going to make much money if we can. And we're fairly encouraged for 2021 coming out of a period of time where it's been very, very difficult to get any beside into where the markets are going. Operator: The next question comes from Tyler Kenyon of Cowen. TylerKenyon: Thanks very much. Good morning and Happy New Year. Wondering if you could maybe provide us an update on your progress and where you are in capturing that $50 million of projected EBITDA enhancement just from network optimization that you laid out in your Investor Day, just with Rancho now closed in a number of other initiatives underway, maybe if you could give us a sense as to how the cadence and realizing that $50 million over the next couple of years and perhaps give us a sense as to what's been realized today. PaulLawrence: Hi, Tyler. As far as the activities there, it's -- it will be a long process to really reap all of the optimization benefits. Clearly the low hanging fruit, which we've acted on, is the closure of steel California, and leveraging the lower cost facilities to ship the material to that market and continue to serve the California market. That that's the, as I said, the low hanging fruit; as far as the other items we're very confident, but they require a lot of heavy lifting. And we're in the early innings of the unleashing of those optimization opportunities. So, as we laid out on the Investor Day; it's a two, three year endeavor. And that's our current outlook as well. We're seeing great benefits from the closure through the controllable cost reduction, but there's still good opportunity ahead that we continue to get more and more confident in as we go down this path. TylerKenyon: So sounds like very little, if any, has been realized about $50 million, today. BarbaraSmith: I wouldn't characterize it as very little to any, but take it over the four years and it's going to be backend weighted. TylerKenyon: Got it. Okay. Thank you. And then just with respect to the investment Poland, sounds like that is expected to ramp by the end of this fiscal year? And how quickly do you think you can get to optimal utilization levels and to maintaining kind of that $20 million run rate? BarbaraSmith: Thank you. Well, we have a really stellar team in Poland and always execute well on their major capital expenditures. And we would expect this to be no different. And I think we can better update you as time goes on because the commissioning activities are going to be late in this fiscal year. But we would expect a smooth commissioning and ramping up of that equipment. Having said that, there's you have to look at the market conditions in Europe, and that'll be a factor that will monitor and that will weather the market and absorb all of that volume, as quick as we would like and hope but at this stage, we think 2021, you'll see a meaningful contribution off of the new mill and you'll see is smooth commissioning and ramp up and we can probably give you a better thing later in this fiscal year. Have a better view into 2022 outlook. Operator: This concludes our question-and-answer session. Ms. Smith, I will now turn the call back over to you. Barbara Smith: Thank you, Elisa. Thank you all for joining us on today's conference call and we look forward to speaking with many of you doing our investor calls in the coming week. And Happy New Year and stay safe. Thank you. Operator: This concludes today's Commercial Metals Company Conference Call. You may now disconnect your lines.
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Commercial Metals Company (NYSE: CMC) Earnings Report Highlights

  • Commercial Metals Company (NYSE:CMC) reported earnings per share (EPS) of $0.78 (adjusted EPS which excluded the $265 million after-tax litigation expense), missing the estimated $0.83 but generated revenue of approximately $1.91 billion, surpassing the estimated $1.83 billion.
  • The company faced a net loss of $175.7 million due to a $265 million litigation expense, contrasting sharply with the previous year's net earnings of $176.3 million.
  • CMC's consolidated core EBITDA for the quarter was $210.7 million, with a core EBITDA margin of 11.0%, and generated $213 million in cash flow from operating activities.

Commercial Metals Company (NYSE:CMC) is a prominent player in the steel and metal industry, known for its production and recycling of steel and metal products. The company operates in North America and Europe, providing a range of products including rebar, wire rod, and merchant bar. CMC competes with other industry giants like Nucor Corporation and Steel Dynamics.

On January 6, 2025, CMC reported earnings per share (EPS) of $0.78 (adjusted EPS which excluded the $265 million after-tax litigation expense), which fell short of the estimated $0.83. Despite this, the company generated revenue of approximately $1.91 billion, surpassing the estimated $1.83 billion. This performance aligns with the Zacks Consensus Estimate, although it marks a significant decrease from the previous year's EPS of $1.63.

The company's first-quarter fiscal 2025 results revealed a net loss of $175.7 million, or $1.54 per diluted share, primarily due to a $265 million litigation expense. In contrast, the previous year's first quarter saw net earnings of $176.3 million, or $1.49 per diluted share. Despite the loss, CMC achieved adjusted earnings of $88.5 million, or $0.78 per diluted share.

CMC's consolidated core EBITDA for the quarter was $210.7 million, with a core EBITDA margin of 11.0%. Late-season construction activity contributed to growth in North American finished steel shipment volumes, although margins were pressured by declines in average steel and downstream product pricing. The North American downstream backlog volumes remained stable, with a strong pipeline for future projects.

The company generated $213 million in cash flow from operating activities, equaling 101% of its consolidated core EBITDA. CMC returned $71 million to shareholders through dividends and share buybacks. The company continues to focus on its strategic growth plan, including organic growth investments and its "TAG" program, which is expected to yield financial benefits in fiscal 2025.

Commercial Metals Company (NYSE:CMC) Quarterly Earnings Insight

  • Earnings per share (EPS) of $0.83 and projected revenue of $1.87 billion for the first quarter ending in November 2024.
  • Analysts predict a decline in earnings, with a focus on the company's price-to-earnings (P/E) ratio of 11.79 and price-to-sales ratio of 0.72.
  • CMC showcases a strong financial foundation with a debt-to-equity ratio of 0.28 and a current ratio of 3.94.

Commercial Metals Company (NYSE:CMC) is a prominent player in the steel and metal industry, known for its production and recycling of steel and metal products. The company operates in a competitive market, with key competitors including Nucor Corporation and Steel Dynamics. CMC's diverse operations span across the United States and Europe, providing a wide range of products to various industries.

On January 13, 2025, CMC will release its quarterly earnings, with Wall Street estimating an earnings per share (EPS) of $0.83 and projected revenue of $1.87 billion. These figures are crucial as they provide insights into the company's financial health and performance during the first quarter, which ended in November 2024. Analysts are keenly observing these metrics to gauge CMC's market position.

Despite the anticipation, analysts predict a decline in CMC's earnings, suggesting the company may not meet the necessary factors for an earnings beat. This expectation is based on the company's current financial metrics, which include a price-to-earnings (P/E) ratio of 11.79 and a price-to-sales ratio of 0.72. These ratios indicate the valuation investors place on CMC's earnings and sales.

CMC's enterprise value to sales ratio is 0.76, slightly higher when accounting for debt and cash, while the enterprise value to operating cash flow ratio is 6.69. These figures reflect CMC's ability to generate cash from operations relative to its overall valuation. The company's earnings yield stands at 8.48%, offering a return on investment for shareholders.

Financially, CMC maintains a conservative debt-to-equity ratio of 0.28, indicating prudent use of debt in its capital structure. The company also boasts a strong current ratio of 3.94, highlighting its ability to cover short-term liabilities with current assets. These metrics underscore CMC's solid financial foundation as it approaches its earnings release.