On Friday, BMO Capital maintained its Market Perform rating on shares of Commercial Metals Company (NYSE:CMC) with a steady price target of $62.00. The decision comes after the company posted fourth quarter and full-year 2024 results that aligned with expectations, but projected a weaker performance in the upcoming quarters. BMO anticipates softer earnings for CMC in the next two quarters.
The firm has adjusted its earnings estimates for CMC, citing the anticipated downturn. However, BMO expects a recovery in earnings for the second half of fiscal year 2025, supported by seasonal trends and an anticipated increase in infrastructure spending, despite a lowered forecast in this area. The analyst noted that while the outlook has been moderated, there is still an expectation for earnings to improve later in the fiscal year.
Commercial Metals Company has been actively progressing in its project pipeline. BMO highlighted CMC's strong balance sheet and free cash flow, which they believe will bolster the company's growth investments. These financial factors are also seen as providing the potential for shareholder returns.
Nevertheless, the analyst pointed out that an increase in capital expenditures could somewhat restrict the company's ability to return capital to shareholders.
The analyst's commentary reflects a cautious but stable outlook for CMC, recognizing the company's ongoing efforts to expand and the financial capability to support these initiatives. Despite the expected short-term earnings dip, BMO's reiteration of the Market Perform rating and $62 price target suggests a belief in CMC's resilience and long-term strategy.
In other recent news, Commercial Metals Company (CMC) reported solid financial results for fiscal year 2024 despite market challenges. The company achieved core EBITDA of $1 billion, marking a decrease from $1.4 billion in fiscal 2023, but still 40% above pre-pandemic levels. CMC generated $900 million in cash flow from operations and returned $261.8 million to shareholders, a 48% increase from the previous fiscal year.
On the project front, the Arizona 2 micro mill is expected to reach operational breakeven in Q1 2025. The Steel West Virginia project is also on track for commissioning in late 2025. These recent developments reflect CMC's ongoing commitment to growth and operational efficiency.
However, CMC expects a decline in consolidated financial results for Q1 2025 due to temporary softness in the construction industry. Despite this, the company anticipates improved market conditions in the second half of fiscal 2025, supported by a solid pipeline of construction projects driven by infrastructure investment. With a projected capital expenditure of $630-$680 million for fiscal 2025, CMC continues to invest in its future.
InvestingPro Insights
Recent data from InvestingPro adds depth to BMO Capital's analysis of Commercial Metals Company (NYSE:CMC). The company's P/E ratio of 12.96 suggests a relatively attractive valuation, especially considering its market cap of $6.43 billion. This valuation aligns with BMO's cautious but stable outlook for CMC.
InvestingPro Tips highlight CMC's financial strength and shareholder-friendly policies. The company has maintained dividend payments for 54 consecutive years and has raised its dividend for 4 consecutive years. This track record supports BMO's observation about CMC's potential for shareholder returns, despite the anticipated increase in capital expenditures.
Moreover, CMC's strong balance sheet, as noted by BMO, is reinforced by InvestingPro data showing that liquid assets exceed short-term obligations and the company operates with a moderate level of debt. This financial stability positions CMC well to weather the projected softer earnings in the coming quarters and to support its growth investments.
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for CMC, providing a broader perspective on the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.