Discussion in 'Stocks' started by stonedinvestor, Dec 27, 2006.

  1. Ok from the buy & hold dept. I think it's time to move on Commercial Metals. CMC. Like a clock they missed earnings again and the stock got smashed pretty good. Heres a summery from Motley Fools:This steel mill operator is in the habit of underdelivering on expectations, and this was the ninth earnings miss in the past 10 quarters. Wall Street wanted $0.74 of earnings per share, but only got $0.71, including a $0.05 charge per share related to inventory accounting.

    That's still much better than the $0.57 EPS of last year, though that period included a $0.12 hit per share of those inventory costs. 20% sales growth is a bright point, and revenue came in at $2 billion even this time. Unit volumes were down, in part because of planned outages to upgrade a ladle crane in the South Carolina facility and a furnace shell in Alabama. But higher selling prices on everything but domestic scrap metal made up for those slowdowns.

    Management said that this quarter was the likely bottom of this international steel industry cycle, and things should look better in the near future. A weaker U.S. dollar and high demand for steel in Poland, combined with solid domestic demand, makes for a positive outlook. The hardware upgrades make sense if management expects higher demand in the coming quarters.

    What I like is there's a reason the analysts are so aggressive with the predictions with this company if they get things right - it's going to make a whole lot of money and who knows maybe get acquired. You would think investors in CMC are in a good place now, dollar is weaker plant is all fixed up if end markets pick up- finally they will blow away a number they have successfully talked down. Goldman Sachs didn't exactly bless the company keeping a neutral but their analyst was out there urging investors not to overreact.

    S&P (god bless them) actually UPGRADED:
    Commercial Metals (CMC)
    Ups to 4 STARS (buy) from 3 STARS (hold)
    Analyst: Leo Larkin
    Commercial Metals posts Nov-Q EPS of $0.71 vs. $0.57, exceeding our $0.65 estimate. Sales rose 21%. Based on company guidance, we are reducing our February quarter EPS estimate to $0.61 from $0.68, which taken with the Nov-Q outperformance, results in no change to our fiscal year 2007 (Aug) EPS estimate of $3.12. We believe shares of Commercial Metals are attractive, currently selling at 8.1 times our fiscal year 2007 EPS estimate. Longer term, we believe Commercial Metals will benefit from consolidation of the global steel industry and a turnaround at its Polish mill. Our 12-month target price of $32 remains unchanged.

    In this we see the wiggle room of efficiency at this company reducing a feb qtr yet not changing yearly guidance! I think you get on board now and catch a wave when Goldman comes around to upgrading.

    Taking a 1/2 position now. But at the large account- probably 500 shares... ~ stoney