On June 20, 2024, Commercial Metals Co (CMC, Financial) released its 8-K filing for the third quarter of fiscal 2024, revealing net earnings of $119.4 million, or $1.02 per diluted share, on net sales of $2.1 billion. This performance fell short of analyst estimates, which projected earnings per share (EPS) of $1.09 and revenue of $2.034 billion.
Company Overview
Commercial Metals Co operates steel mills, steel fabrication plants, and metal recycling facilities in the United States and Europe. The company manufactures rebar and structural steel, which are essential for the nonresidential construction sector. CMC's operations are divided into two reportable segments: North America and Europe.
Performance and Challenges
Despite solid seasonal demand and strong market fundamentals in North America, CMC's Q3 performance was impacted by lower margins and increased costs. The company's net earnings of $119.4 million, or $1.02 per diluted share, were significantly lower than the $234.0 million, or $1.98 per diluted share, reported in the same period last year. Revenue also declined from $2.3 billion to $2.1 billion year-over-year.
Financial Achievements
CMC reported consolidated core EBITDA of $256.1 million, with a core EBITDA margin of 12.3%. The North America segment showed healthy shipment volumes and product margins, supported by a robust pipeline of new construction projects. The Europe Steel Group achieved near breakeven results, reflecting improved performance despite a challenging market environment.
Income Statement Highlights
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Net Sales | $2.1 billion | $2.3 billion |
| Net Earnings | $119.4 million | $234.0 million |
| Earnings Per Share (Diluted) | $1.02 | $1.98 |
Balance Sheet and Cash Flow
As of May 31, 2024, CMC's balance sheet remained strong, with cash and cash equivalents totaling $698.3 million and available liquidity of nearly $1.5 billion. The company repurchased 931,281 shares of common stock valued at $51.8 million during the quarter. Additionally, the board of directors declared a quarterly dividend of $0.18 per share, marking a 13% increase year-over-year.
Segment Performance
In North America, finished steel shipments increased by 12.3% sequentially but were down modestly compared to the prior year. The adjusted EBITDA for the North America Steel Group decreased to $246.3 million from $367.6 million in the prior year period, driven by lower margins over scrap costs. The Europe Steel Group reported an adjusted EBITDA loss of $4.2 million, showing improvement from previous quarters.
Commentary
"Our business continued to generate strong financial results during the third quarter, with core EBITDA, core EBITDA margin, cash flows, and net earnings all at levels well above long-term averages," said Peter Matt, President and Chief Executive Officer. "Fundamentals remain good within our North American markets, supporting stable to modestly improving steel product margins, healthy shipment levels, and steady downstream backlog volumes."
Analysis
Commercial Metals Co's Q3 fiscal 2024 results highlight the company's resilience amid market challenges. While the earnings missed analyst estimates, the company's strong balance sheet and liquidity position provide a solid foundation for future growth. The ongoing ramp-up of the Arizona 2 micro mill and the development of the fourth micro mill in West Virginia are expected to drive long-term growth in earnings, cash flow, and shareholder value.
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Explore the complete 8-K earnings release (here) from Commercial Metals Co for further details.
