CMC - Commercial Metals shines after steel producer shows strength in Q2 stock surges 7%

2023-03-23 12:34:21 ET

Shares of Texas-based steel producer Commercial Metals ( NYSE: CMC ) rose as much as +7.5% to a day-high of $47.87 on Thursday after the company posted a narrow EPS beat for the second quarter, while topping revenue consensus comfortably.

CMC posted Q2 Non-GAAP EPS of $1.44, beating by just a cent. However, revenue of $2.02B was +1.0% Y/Y and also ahead of expectations by at least $80 million.

Q2 revenue breakdown: North America $1.64B vs $1.82B last year, Europe $355.6M vs $406.5M, Corporate and Other $21.4M vs $3.9M.

Other Q2 metrics: Core EBITDA $302.8M vs $323.1M, COGS $1.62B vs $1.61B, SG&A expenses $150.4M vs $128M, Steel product shipments 436,000 tons vs 450,000 tons.

The company said it ended the quarter with cash and cash equivalents at $604.0 million, while its available liquidity stood at $1.5 billion.

CEO Barbara Smith said key internal indicators for its business remained positive, implying a strong outlook for demand in North America during the 2023 construction season and beyond.

"We are entering spring with record backlog value for this time of year and continue to experience healthy project bid volumes, giving us confidence in the strength of our book of business," Smith said.

In the third quarter, the company said it expects to generate sequential improvement in core EBITDA, and also hopes to commission its Arizona 2 micro mill.

Commenting on shipments, CEO Smith said, "North America finished steel product shipments are anticipated to improve from second quarter levels due to normal seasonality, the recovery of volumes delayed by weather disruptions, and the support of a historically high downstream backlog."

CMC's industrial projects that are currently in place, as well as new projects, among other things, will support CMC's North America volumes in the quarters ahead, the company said.

In Europe, the company said it anticipates seasonal improvement and expects shipment levels to remain "above the long-term historical average".

CMC said Q3 operations will be impacted by a scheduled project upgrade similar to the likes of the planned outage taken during Q2.

CMC rose 35% in 2022, while the S&P 500 fell 20% last year.

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