Commercial Metals Shares Rise Nearly 4% as Q4 Earnings and Revenue Beat Expectations

Commercial Metals Company (NYSE:CMC) reported stronger-than-expected fourth-quarter earnings and revenue on Thursday, supported by improved performance across its North American steel operations and substantial growth in its Construction Solutions business.

Shares in the US steel and construction solutions provider rose 3.81% in pre-market trading following the announcement.

Adjusted earnings per share reached $2.09, exceeding analysts’ consensus estimate of $1.96 by $0.13.

Quarterly revenue increased 25.7% year-on-year to $2.65 billion, compared with $2.11 billion in the corresponding period last year. The result also exceeded market expectations of $2.56 billion.

The company reported net earnings of $212.5 million, equivalent to $1.91 per diluted share, compared with earnings per share of $1.35 a year earlier.

Core EBITDA Rises 35% as Steel Operations Strengthen

Commercial Metals reported consolidated core earnings before interest, tax, depreciation and amortisation (EBITDA) of $393.7 million for the fourth quarter, representing a 35.1% increase from the previous year.

The company’s core EBITDA margin expanded by 100 basis points to 14.8%, reflecting improved operating performance and contributions from its business improvement initiatives.

President and Chief Executive Officer Peter Matt attributed the results to stronger execution across the company’s North American steel operations and progress under its enterprise-wide TAG programme.

“Our fourth quarter core EBITDA performance delivered solid year-over-year growth, driven by strong execution of our North American steel franchise and continued momentum of enterprise-wide TAG benefits,” Matt said.

The improvement in profitability accompanied higher shipment volumes and stronger metal margins, helping the company deliver earnings growth above the rate of revenue expansion.

North America Steel Group Reports Higher Margins and Shipments

Commercial Metals’ North America Steel Group generated adjusted EBITDA of $317.5 million during the quarter, an increase of 32.6% year-on-year.

The division’s adjusted EBITDA margin improved to 16.4%, compared with 14.8% in the prior-year period.

Metal margins increased by $84 per ton to $652 per ton, providing an important contribution to the division’s profitability.

Finished goods shipment volumes rose 5.3% compared with the same quarter last year, reflecting increased activity across the company’s steel operations.

Merchant bar shipments recorded particularly strong growth, increasing 27.5% year-on-year.

The combination of higher volumes and improved margins supported the division’s earnings performance, reinforcing the importance of North American steel operations to Commercial Metals’ overall financial results.

Construction Solutions Revenue Nearly Doubles

The Construction Solutions Group reported fourth-quarter net sales of $431.4 million, representing a 94.5% increase from the previous year.

Adjusted EBITDA rose 100.9% to $101.7 million, reflecting substantial growth in the division’s earnings contribution.

Despite the overall improvement, the company’s precast concrete operations performed below management expectations.

Commercial Metals attributed the weaker performance to softness in residential construction activity in certain regional markets.

The mixed performance highlights the different demand conditions affecting the company’s construction-related businesses.

While the broader Construction Solutions Group delivered significant revenue and earnings growth, weaker residential activity remained a constraint on parts of its operations.

CMC Expects Seasonal Pressure on Fiscal 2027 First-Quarter Earnings

Commercial Metals provided guidance for the first quarter of fiscal 2027, indicating that seasonal trends and changes in raw material costs are likely to influence profitability.

The company expects adjusted EBITDA in its North America Steel Group to remain broadly unchanged from the fourth quarter.

Improved steel pricing is anticipated to largely offset higher scrap costs and the seasonal decline in shipment volumes typically experienced during the period.

For the Construction Solutions Group, management expects adjusted EBITDA to decline sequentially as a result of normal seasonal patterns.

The outlook suggests that the company anticipates relatively stable earnings from its main steel operations, while construction-related activity may moderate following the stronger fourth-quarter performance.

Net Leverage Falls Below Target as Shareholder Returns Continue

Commercial Metals also reported progress in reducing its financial leverage.

Net leverage, adjusted for acquisitions, declined to 1.9 times, bringing the measure below the company’s target of 2.0 times.

The reduction indicates an improvement in the company’s debt position relative to its earnings base, following its recent acquisition-related adjustments.

During the fourth quarter, Commercial Metals repurchased 383,333 shares for a total of $26.7 million.

The company also declared a quarterly dividend of $0.20 per share.

The capital returns accompanied stronger earnings and improved leverage, reflecting the company’s continued focus on shareholder distributions while maintaining its financial targets.

Commercial Metals’ fourth-quarter results demonstrated growth across its principal operating divisions, with higher steel margins, increased shipment volumes and substantial expansion in Construction Solutions supporting the earnings beat.

Looking ahead, investors will be monitoring whether improved pricing and operational efficiencies can offset higher scrap costs and seasonal fluctuations in demand during the first quarter of fiscal 2027.

Commercial Metals Company stock price