Commercial Metals is forming a cup base and approaching a buy point on the strength of a recovery in the metals industry. Combined with an expected rise in profitability, CMC is today's IBD 50 Stocks to Watch pick.
The stock is climbing the right side of a cup base and is within striking distance of a 46.78 buy point. CMC successfully completed a consolidation within days of Russia's attack on Ukraine. From there it continued to climb on the strength of demand for steel and metals during the Ukraine conflict until reaching a high on April 21.
But then it began to descend as the metals industry and indeed the entire stock market entered a correction.
Since May 12, it has climbed back up. It gained support around its 50-day line, and is above its 21-day exponential moving average. Its relative strength line hit a new high this week, according to MarketSmith. The stock fell more than 4% Wednesday after the Organization for Economic Cooperation and Development cut its global growth estimates to 3% in 2022, down from its 4.5% estimate. That followed other warnings of possible stagflation.
Upcoming Earnings
With its next quarterly earnings report due around June 16, analysts surveyed by FactSet expect CMC to earn $1.93 a share, 85% higher than the year-ago quarter. They expect sales of $2.4 billion.
Be aware that buying just before a stock reports earnings is risky, since an EPS or sales miss could send shares sharply lower. You can minimize your risk by waiting to see how the company reports and how the market reacts. You can also use an options strategy to limit your potential downside.
The steel and metals products maker operates steel mills and recycling plants throughout North America and Europe.
Commercial Metals posted 132% earnings growth last quarter, while sales growth came in at 37%. It has a three-year EPS growth rate of 39%.
Commercial Metals stock has a 98 Composite Rating and earns the No. 3 rank among its peers in the Metal Fabrication industry group. Insteel Industries is the No. 1-ranked stock within the group.
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