Commercial Metals Co. reaffirmed a strong 2022 outlook Thursday after beating second-quarter earnings and revenue views. But CMC stock fell as steel producer Nucor warned on weakening prices.
Steel producer Steel Dynamics guided Q1 EPS of $5.55-$5.59, above Wall Street's estimates. Nucor forecast Q1 EPS of $7.20-$7.30, below views.
"While end market demand remains strong, average realized selling prices in sheet have softened during the first quarter reflecting increased import volumes coupled with modest destocking," Nucor said.
Steel Dynamics leapt 8.1% Thursday and Nucor stock edged down 0.1%.
Late Thursday, U.S. Steel guided to Q1 EPS of $2.96-3 vs. views for $3.77. U.S. Steel stock fell 4% over night after rising 5.6% to a new high in Thursday's session.
Commercial Metals Earnings
Estimates: Wall Street expected CMC earnings to more than double year over year to $1.38 per share. Revenue was seen growing 30% to $1.906 billion, according to FactSet.
Results: Excluding various items, CMC earnings leapt 132% to $1.53 a share. Revenue climbed 37% to $2.01 billion. The average selling price for steel products rose by $346 per ton vs. a year ago.
The second quarter tends to see fewer shipping days due to major holidays and winter weather, the maker of steel and metal products says.
Outlook: Commercial Metals backed a strong 2022 outlook but did not offer specific guidance. In 2022, CMC earnings per share are expected to jump 59% to $5.62, FactSet says.
"Current robust demand for each of CMC's major product lines is expected to persist throughout the upcoming spring and summer construction season, underpinned by our growing downstream backlog as well as solid levels of new work entering the project pipeline," CEO Barbara Smith said in Thursday's earnings release.
Commercial Metals expects shipment volumes of finished steel products to rise in Q3 vs. Q2, following seasonal trend patterns. CMC said it has not experienced disruptions from the war in Ukraine.
CMC Stock
Shares of Commercial Metals fell 1.85% to 40.25 on the stock market today. CMC stock cleared a 38.82 buy point Feb. 28 and grew quickly extended, but is now back in the 5% chase zone.
The relative strength line for CMC stock has bolted this year to multiyear highs. A rising RS line indicates a stock is outperforming the S&P 500 index.
Bear in mind, the overall market's attempted uptrend remains intact, but it has not yet climbed out of its current status of "market in correction." In any case, buying a stock just before earnings is always risky. IBD's earnings options strategy helps to limit risk around earnings.
Boost From Infrastructure Spending
Commercial Metals expects strong incremental demand from the recently passed Infrastructure Investment and Jobs Act.
Its steel and metal products are used in heavy transport trucks, rail cars, construction cranes, military vehicles, garbage trucks and more. It fabricated or "downstream" products are mostly rebar structural frameworks, used to reinforce large-scale concrete projects.
Commercial Metals is adding mills and expects to close the Tensar acquistion in Q3, it said Thursday.
The stock earns a best-possible 99 IBD Composite Rating, which combines key fundamental and technical metrics in a single easy-to-use score, and superior 97 Relative Strength Rating out of a possible 99. That means it has outperformed 97% of all stocks in the past year.
In recent years, steel "dumping" by Chinese companies hurt U.S. players.
