Commercial Metals Co
NYSE:CMC
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Intrinsic Value
The intrinsic value of one CMC stock under the Base Case scenario is 48.98 USD. Compared to the current market price of 59.91 USD, Commercial Metals Co is Overvalued by 18%.
The Intrinsic Value is calculated as the average of DCF and Relative values:
Valuation Backtest
Commercial Metals Co
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Fundamental Analysis
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Commercial Metals Company (CMC) stands as a prominent player in the steel and metal recycling industry, with a rich legacy dating back to 1915. Based in Irving, Texas, the company has carved a niche for itself through a strategic focus on high-quality metal production, recycling, and fabrication services. CMC operates across several key segments, including steel production, downstream value-added products, and metal recycling, consistently emphasizing efficiency and sustainability. By leveraging advanced technologies in their production processes, CMC has not only enhanced operational performance but also minimized environmental impact—a combination that resonates well with the growing deman...
Commercial Metals Company (CMC) stands as a prominent player in the steel and metal recycling industry, with a rich legacy dating back to 1915. Based in Irving, Texas, the company has carved a niche for itself through a strategic focus on high-quality metal production, recycling, and fabrication services. CMC operates across several key segments, including steel production, downstream value-added products, and metal recycling, consistently emphasizing efficiency and sustainability. By leveraging advanced technologies in their production processes, CMC has not only enhanced operational performance but also minimized environmental impact—a combination that resonates well with the growing demands of socially-responsible investing. With a presence in the U.S. and international markets, the company is well-positioned to capitalize on the ongoing infrastructure boom, driven by government spending and robust construction activity.
Investors considering CMC can appreciate the company's solid financial performance, evidenced by consistent revenue growth and healthy margins amidst a fluctuating commodity landscape. Commercial Metals has adeptly navigated industry challenges by maintaining a disciplined approach to capital allocation and fostering innovation, which has helped them optimize their manufacturing processes and expand their product offerings. The company’s commitment to returning value to shareholders is clearly illustrated through dividends and share repurchase programs. As the world increasingly emphasizes sustainability and responsibility, CMC's strong position within the recycling market presents considerable opportunities for growth. Overall, CMC embodies a compelling investment case characterized by resilience, strategic growth initiatives, and a dedication to maintaining operational excellence while contributing positively to the community and environment.
Commercial Metals Company (CMC) operates primarily in the steel and metal products industry. Its core business segments include:
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Manufacturing: This segment involves the production of various metal products, including steel rebar, wire rod, and merchant bar. CMC operates mini-mills that use electric arc furnace technology, allowing for efficient steel production with a focus on recycling scrap metal.
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Fabrication: CMC’s fabrication segment provides value-added services such as processing and fabricating steel products for construction and industrial applications. This includes producing fabricated rebar, which is essential for concrete reinforcement in construction projects.
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Recycling: CMC has a significant recycling operation that collects and processes scrap metal, which is then used as raw material for its steel manufacturing processes. This segment emphasizes sustainability by reducing waste and promoting recycling practices within the industry.
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Metal Distribution: Through its distribution network, CMC provides a wide range of metal products and services, offering customers access to structural steel, plate, and other metal products needed for various applications, from construction to industrial use.
These segments collectively allow CMC to serve a diverse set of customers across different industries, positioning the company as a key player in the metal market while emphasizing sustainability and efficiency in its operations.
Commercial Metals Company (CMC) possesses several unique competitive advantages that help it stand out in the steel and metal manufacturing industry:
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Vertical Integration: CMC operates across multiple stages of the supply chain, from recycling materials to manufacturing and distribution. This vertical integration allows for better control over costs, quality, and supply reliability, which is a significant advantage over competitors who may rely heavily on outside suppliers.
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Sustainability Focus: The company has made a strong commitment to sustainability, emphasizing the recycling of steel and metals. This eco-friendly approach not only helps reduce production costs but also appeals to a growing segment of environmentally conscious consumers and businesses.
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Strong Brand and Reputation: With a long history and a strong reputation in the industry, CMC has built trust with customers. This brand recognition can lead to long-term partnerships and customer loyalty, which is difficult for new entrants to replicate.
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Advanced Technology: CMC invests in modern technology and innovative manufacturing processes. This focus on efficiency and product quality can help them reduce production costs and improve margins, giving them an edge over less technologically advanced competitors.
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Diverse Product Offering: The company produces a wide range of products, including rebar, wire rod, and fabricated metal products. This diversity allows CMC to serve various sectors (such as construction and manufacturing), reducing dependence on any single market segment.
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Strategic Locations: CMC has strategically located facilities to serve key markets more effectively. Proximity to customers and suppliers can lead to reduced transportation costs and improved service levels, giving them a logistical advantage.
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Experienced Management Team: The leadership at CMC has extensive industry experience and is adept at navigating market challenges and opportunities. Strong management can drive operational efficiencies and foster a culture focused on continuous improvement.
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Market Adaptability: CMC has demonstrated an ability to adapt to changing market conditions, including shifts in demand, technology advancements, and economic cycles. This adaptability can provide resilience against competitive pressures.
By leveraging these competitive advantages, Commercial Metals Company is well-positioned to maintain and enhance its market position against rivals in the steel and metal manufacturing industry.
Commercial Metals Company (CMC) faces several risks and challenges in the near future, reflecting both industry-specific factors and broader economic conditions. Here are some of the key risks and challenges:
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Market Volatility: Fluctuations in commodity prices, particularly for steel and scrap metals, can significantly impact margins. Prices are influenced by global demand, supply chain issues, and geopolitical factors.
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Regulatory Changes: Changes in trade policies, tariffs, and environmental regulations can affect operational costs and competitiveness. Compliance with increasingly strict environmental standards may require additional investments.
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Supply Chain Disruptions: Ongoing supply chain challenges, exacerbated by the COVID-19 pandemic and geopolitical tensions, could hinder the availability of raw materials and other components, leading to production delays.
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Economic Conditions: Economic downturns can reduce demand for construction and infrastructure projects, which are key markets for CMC's products. A potential recession could lead to reduced capital expenditure in these areas.
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Competition: Increasing competition from both domestic and international steel producers can pressure pricing and market share. The emergence of new entrants or innovations can further intensify this competitive landscape.
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Labor Issues: Labor shortages or strikes in key regions could impact production capabilities. Higher labor costs may reduce profitability if not managed effectively.
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Technological Advancements: The pace of technological change in the steel and metals industry may require significant investment in modernization and innovation to remain competitive.
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Environmental and Sustainability Concerns: As sustainability becomes a more pressing global issue, CMC may face pressure from stakeholders to adopt more eco-friendly practices, which could entail additional costs or changes in operations.
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Debt Levels: If CMC has a significant amount of debt, changes in interest rates or market conditions could impact its financial flexibility and ability to invest in growth opportunities.
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Geopolitical Risks: Events such as trade disputes, sanctions, or conflicts can impact supply routes and operational stability, particularly if CMC sources materials from volatile regions.
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Potential Legal Risks: The company may be exposed to litigation risks related to employment, environmental compliance, and contractual disputes, which could lead to financial liabilities and reputational damage.
Addressing these challenges will require proactive risk management strategies, including diversifying supply chains, investing in technology, and maintaining strong relationships with customers and suppliers.
Revenue & Expenses Breakdown
Commercial Metals Co
Balance Sheet Decomposition
Commercial Metals Co
Current Assets | 3.3B |
Cash & Short-Term Investments | 857.9m |
Receivables | 1.2B |
Other Current Assets | 1.3B |
Non-Current Assets | 3.5B |
PP&E | 2.6B |
Intangibles | 620.5m |
Other Non-Current Assets | 327.4m |
Current Liabilities | 834.9m |
Accounts Payable | 350.6m |
Accrued Liabilities | 410.2m |
Other Current Liabilities | 74.1m |
Non-Current Liabilities | 1.7B |
Long-Term Debt | 1.2B |
Other Non-Current Liabilities | 532.4m |
Earnings Waterfall
Commercial Metals Co
Revenue
|
7.9B
USD
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Cost of Revenue
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-6.6B
USD
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Gross Profit
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1.4B
USD
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Operating Expenses
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-665.1m
USD
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Operating Income
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693.6m
USD
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Other Expenses
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-208.1m
USD
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Net Income
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485.5m
USD
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Free Cash Flow Analysis
Commercial Metals Co
USD | |
Free Cash Flow | USD |
In Q4 2024, CMC recorded net earnings of $103.9 million, or $0.90 per share, despite a year-over-year decline of 43%. The core EBITDA reached $227.1 million, down 31%. Yet, margins remain above historic averages. CMC anticipates a decline in Q1 2025 results due to construction market softness but expects an increase in its Europe Steel Group's EBITDA driven by a CO2 credit of $35-40 million. CMC’s strategic initiative, TAG, aims to enhance margins and is set to deliver meaningful financial benefits starting in 2025, bolstering long-term growth and value.
What is Earnings Call?
CMC Profitability Score
Profitability Due Diligence
Commercial Metals Co's profitability score is 54/100. The higher the profitability score, the more profitable the company is.
Score
Commercial Metals Co's profitability score is 54/100. The higher the profitability score, the more profitable the company is.
CMC Solvency Score
Solvency Due Diligence
Commercial Metals Co's solvency score is 77/100. The higher the solvency score, the more solvent the company is.
Score
Commercial Metals Co's solvency score is 77/100. The higher the solvency score, the more solvent the company is.
Wall St
Price Targets
CMC Price Targets Summary
Commercial Metals Co
According to Wall Street analysts, the average 1-year price target for CMC is 64.69 USD with a low forecast of 60.6 USD and a high forecast of 72.45 USD.
Dividends
Current shareholder yield for CMC is .
Shareholder yield represents the total return a company provides to its shareholders, calculated as the sum of dividend yield, buyback yield, and debt paydown yield. What is shareholder yield?
Profile
Country
Industry
Market Cap
Dividend Yield
Description
Commercial Metals Co. engages in the manufacture, recycling, and marketing of steel and metal products. The company is headquartered in Irving, Texas and currently employs 11,089 full-time employees. The firm manufactures steel and metal products through a network of facilities that includes seven electric arc furnace (EAF) mini mills, two EAF micro mills, a rerolling mill, steel fabrication and processing plants, construction-related product warehouses, and metal recycling facilities in the United States and Poland. Its operations are conducted through two reportable segments: North America and Europe. The firm's North America segment is a vertically integrated network of recycling facilities, steel mills and fabrication operations. Its Europe segment is a vertically integrated network of recycling facilities, an EAF mini mill and fabrication operations located in Poland.
Contact
IPO
Employees
Officers
The intrinsic value of one CMC stock under the Base Case scenario is 48.98 USD.
Compared to the current market price of 59.91 USD, Commercial Metals Co is Overvalued by 18%.