Metal and steel manufacturer Commercial Metals is the IBD Stock Of The Day as shares close in on a buy point. CMC stock rose while its relative strength hit a high.
Commercial Metals has posted impressive revenue and earnings growth in recent quarters, thanks to soaring demand for steel from carmakers and appliance manufacturers, among others, as production comes back online post pandemic shutdowns. Passage of the Biden Administration's infrastructure bill has also buoyed steelmaker stocks.
Still-high steel prices are also fueling profits. The benchmark futures prices for U.S. U.S. hot-rolled coils of steel has declined to the $1,100 range recently from a peak of nearly $2,000 in August. But they're still well above pre-pandemic levels of around $600.
As a result, Irving, Texas-based Commercial Metals posted year-over-year earnings growth of 59% and 179% in the last two quarters. Sales gained 44% and 42%.
CMC Earnings
Commercial Metals earnings surged 179% in the fourth quarter on a 42% jump in sales to $1.98 billion, both above estimates.
Management told investors that November-quarter earnings highlighted "a growing construction backlog in North America, as well as broad strength across key end markets in both North America and Europe."
The company also noted increased margins for steel products in North America.
On Jan. 10, Commercial Metals announced a plan to build another state-of-the-art micro mill. The new mill will primarily serve the Northeast, mid-Atlantic and Mid-Western U.S. markets.
"The new micro mill will fortify our position in the large construction markets within the region and optimize CMC's existing Eastern U.S. operational footprint through enhanced production flexibility, improved service capabilities, and logistical efficiencies," CEO Barbara Smith said in a statement.
CMC Stock
Shares climbed 1.5% to 36.75 on the stock market today. CMC stock is in a consolidation with an official buy point of 38.82, according to MarketSmith.
Shares formed a fairly shallow base, declining 16% in late January. But it quickly found support at its 200-day line and bounced back above its 50-day line.
CMC stock could be forming a handle. Investors already could use Wednesday's high of 37.49 + 10 cents as an early entry.
CMC's relative strength line is trending upward, at multiyear highs. The RS line hitting a new high with the stock still basing is especially bullish.
Its EPS Rating is a top-notch 99, while its RS Rating is 93. CMC is a leader in the metal fabrication industry group, which ranks No. 67 of the 197 groups IBD measures. The stock, with its 98 Composite Rating, ranks highest in the group by that metric.
Among other steelmakers, U.S. Steel fell 0.5%, Nucor rose 1.65% and Steel Dynamics advanced 1.1%.
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
