Commercial Metals Q4 Earnings Call Highlights

Key Points

• Commercial Metals reported a strong fiscal 2026: Full-year core EBITDA rose to approximately $1.4 billion from $837 million, while fourth-quarter core EBITDA increased 35.1% year over year to about $394 million, driven by margin expansion, TAG program benefits and the Precast acquisition.
• North America Steel delivered significant improvement, with adjusted EBITDA up 25.2% sequentially to $317 million as higher selling prices, lower scrap costs, stronger shipments and merchant-bar growth lifted metal margins.
• CMC expects lower capital spending and increased shareholder returns in fiscal 2027: Capital expenditures are projected at roughly $400 million, net leverage has fallen to 1.9 times, and management plans to accelerate share repurchases using the approximately $700 million remaining authorization.

Commercial Metals NYSE: CMC reported stronger fiscal 2026 fourth-quarter and full-year profitability, citing margin expansion, benefits from its Transform, Advance and Grow, or TAG, program, and contributions from its recently acquired Precast operations.

For the full year, core EBITDA rose to approximately $1.4 billion from $837 million in fiscal 2025, while core EBITDA margin increased 380 basis points to 14.5%, President and Chief Executive Officer Peter Matt said. Fourth-quarter core EBITDA increased 35.1% year over year to about $394 million, and core EBITDA margin reached 14.8%.

Fourth-quarter net earnings were approximately $213 million, or $1.91 per diluted share, according to Senior Vice President and Chief Financial Officer Paul Lawrence. The company incurred $26.8 million of pre-tax expenses excluded from adjusted earnings, including $19.8 million of non-cash amortization associated with acquired backlog. Adjusted earnings rose 21% sequentially.

North America Steel Results Gain From Mix and TAG

CMC’s North America Steel Group generated adjusted EBITDA of $317 million, up 25.2% sequentially. Lawrence attributed the increase to TAG benefits, higher metal margins and increased merchant bar shipments.

Metal margin increased $42 per ton sequentially to $652 per ton, as average selling prices rose $32 per ton and scrap costs declined $10 per ton. Finished steel shipments increased 7.1% from the prior quarter, with growth in merchant products, downstream products and rebar.

North America Steel Group adjusted EBITDA margin reached 16.4%, increasing 220 basis points sequentially and 160 basis points from the prior-year period. Downstream product volume rose 8.5% year over year in the fourth quarter, while downstream backlog increased 15.5% from a year earlier and 5% sequentially.

Merchant bar shipments climbed 27.5% year over year, supported by the Arizona 2 micro-mill. Matt said the company’s network provides flexibility to shift production between rebar and merchant products, which currently carry a meaningful pricing premium to rebar. CMC said it sees a starting objective of reaching 1 million tons of merchant shipments, implying an additional 150,000 to 200,000 tons of volume over time.

Management said rebar imports from South Korea declined during September as arbitrage economics weakened. Matt said imports from countries subject to the company’s anti-dumping and countervailing-duty cases have largely left the market.

Precast Faces Residential Pressure but Backlog Improves

The Construction Solutions Group’s fourth-quarter sales increased 94.5% year over year, while adjusted EBITDA more than doubled and adjusted EBITDA margin expanded 80 basis points. The year-over-year comparison reflected the addition of Precast businesses.

However, CMC said Precast results fell below its expectations because of softer residential demand in certain southeastern markets. Precast generated $57.1 million of adjusted EBITDA during the quarter and has contributed roughly $150 million of adjusted EBITDA since the acquisitions, excluding purchase-accounting effects.

Matt said the pressure was principally volume-related and concentrated in southeastern residential construction, rather than pricing. He said pricing continued to rise across the portfolio, while non-residential and infrastructure demand helped offset some residential weakness. The residential portion of the Precast portfolio is operating at roughly 50% to 60% of what management considers a normal environment, he said.

Bookings rose year over year and increased 12.6% sequentially. Backlog was about 3% higher than a year earlier and 4% above the third quarter, while average backlog pricing also increased. Matt said the company continues to view annual Precast EBITDA of about $240 million to $250 million as an appropriate target for the current year, although first-quarter Precast EBITDA is expected to decline by the mid- to high-single-digit percentage range sequentially on seasonal factors.

CMC said functional integration of the Precast platform is substantially complete, and expected synergies are meeting or exceeding expectations. The company identified additional opportunities in operations, procurement, footprint optimization and commercial execution.

Capital Spending Set to Decline as Projects Enter Startup

CMC expects fiscal 2027 capital expenditures of roughly $400 million, down nearly $200 million from about $580 million in fiscal 2026. About one-quarter of the expected fiscal 2027 spending is tied to growth projects, primarily the West Virginia micro-mill along with GalvaBar and geogrid investments.

The company said its West Virginia mill has rolled its first billet and is progressing through hot commissioning. CMC expects startup to unfold over about 12 months and expects the operation to reach EBITDA breakeven about six months after startup. Production for fiscal 2027 is expected to be below 200,000 tons as commissioning continues, Lawrence said.

First production at the GalvaBar Tennessee facility is expected in November, while the new Tensar geogrid line in Blackwell, Oklahoma is already in startup. CMC expects the Tennessee facility to more than double GalvaBar production capacity.

TAG produced more than $250 million of gross run-rate benefits exiting fiscal 2026, according to Matt. The company expects to achieve an additional $100 million in run-rate benefits by the end of fiscal 2027.

Balance Sheet, Buybacks and Fiscal 2027 Outlook

CMC reduced net leverage, adjusted for acquisitions, to 1.9 times, below its target of two times. With capital expenditures declining and cash flow expected to improve, management said it plans to accelerate activity under its share repurchase program. The company has approximately $700 million remaining under its authorization.

For the fiscal first quarter, CMC expects North America Steel Group adjusted EBITDA to be nearly flat sequentially. Improved pricing is expected to largely offset higher scrap costs, startup costs and a modest seasonal decline in shipments. Management expects Construction Solutions Group adjusted EBITDA to decline sequentially on normal seasonal trends.

Europe’s adjusted EBITDA is expected to increase meaningfully from the fourth quarter, aided by improving operating conditions and an anticipated €10 million to €15 million in carbon-dioxide credits. Lawrence said higher energy costs, expected to rise by roughly $10 to $15 per ton, will offset part of that benefit.

The company expects an effective tax rate of approximately 24% in fiscal 2027 and said it does not anticipate significant U.S. federal cash tax payments through much of the year because of 48C program benefits, bonus depreciation related to the West Virginia mill and accelerated depreciation from the Precast acquisitions.

About Commercial Metals (NYSE:CMC)

Commercial Metals Company NYSE: CMC is a steel and metals manufacturer, fabricator and recycler headquartered in Irving, Texas. Founded in 1915, the company operates a vertically integrated business that collects and processes ferrous scrap, produces steel and supplies products used in construction and infrastructure projects.

CMC's product portfolio includes reinforcing bar, merchant bar, wire rod, structural components and other steel products. Through its fabrication and construction services, the company also processes and prepares reinforcing steel for commercial, industrial, transportation and other building projects.

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