What happened
Quarterly results for Commercial Metals (CMC -0.43%) fell short of expectations, and the company warned of further declines ahead. Investors are heading for the exits, sending shares of the steelmaker down more than 10% as of 1:32 p.m. ET on Monday.
So what
Commercial Metals is a metal fabricator and recycler. The company said that demand for finished steel products remained healthy in its fiscal fourth quarter, ending Aug. 31, but fewer new contracts hurt volumes and backlog.
The company reported adjusted earnings of $1.69 per share in the quarter, falling short of the $1.81 consensus estimate. Revenue of $2.21 billion beat analysts' expectations for $2.18 billion.
For the year, Commercial Metals reported earnings of $7.25 per share on net sales of $8.8 billion, compared to $9.95 per share on sales of $8.9 billion a year ago. The company reported core earnings before interest, taxes, depreciation, and amortization (EBITDA) of $1.5 billion, down slightly compared to a record fiscal 2022.
CEO Peter Matt said that demand was solid in North America, but the benefit was "partially offset by a challenging market environment within Europe, where weaker demand and compressed margins meaningfully impacted our results."
Now what
The company said it expects first-quarter performance will be strong by historical standards but decline from the last three months due to seasonally lower shipments, margin compression in North America, and the continuation of challenging market conditions in Europe.
The company's cash balance at the end of the quarter totaled $592.3 million, with available liquidity of $1.6 billion. The company is putting its cash to work, repurchasing 352,000 shares of its common stock.
Commercial Metals is navigating through a difficult market the best it can and has the wherewithal to survive a prolonged slowdown. But until conditions change, it is going to be hard for the company to outperform, and investors are adjusting their expectations accordingly.
