Commercial Metals Company CMC announced plans to build its third micro mill facility at Mesa, AZ. This shows the company’s effort to replace the existing inefficient and higher cost rebar capacity and expand its offering to the West Coast in order to meet the rising demand for rebar and merchant bar quality (MBQ) products. Notably, the mill will be the world’s first to produce MBQ steel products through a “continuous-continuous production process”.

The company plans to invest $300 million in constructing the new facility and is expected to commence operation in early 2023. The facility will employ 185 people with an estimated nominal annual capacity to produce 500,000 tons, including 150,000 tons of merchant products. The company intends to replace Southern California rebar facility, as a significant land value of its existing real estate will reduce the capital investment of the new project and increase return on investment.

The new mill will be located adjacent to the company’s current Mesa, AZ facility, which will allow Commercial Metals to bank on the existing infrastructure and expertise of its engineering and operating personnel. When fully operational, the company’s new mill will create annual economic activity of nearly half a billion dollars in Mesa and generate roughly 1000 new job opportunities in the state of Arizona. The company expects the mill to generate an incremental EBITDA of $50 million.

Commercial Metals projects solid construction and infrastructure activities for the fiscal fourth quarter. The company is poised to gain from strong fabrication backlogs, solid bidding activity as well as upbeat metal margins, supported by the current rebar prices.

Spending in construction activity in the United States remains strong as U.S. business is driven by pre-funded long-term construction projects. This will translate into rebar demand and improved long product steel demand, which bodes well for Commercial Metals’ performance. The company continues to expand market share in the United States and Poland while reducing operating costs. Robust construction demand in Poland and the company’s investment in the country poise it well for improved performance in the future.

Price Performance

Commercial Metals’ shares have appreciated 45.4% over the past year, as against the industry’s loss of 1.2%.

Zacks Rank & Other Stocks to Consider

Commercial Metals currently sports a Zacks Rank #1 (Strong Buy).

A few other top-ranked stocks in the basic materials space are Coeur Mining Inc. CDE, The Scotts MiracleGro Company SMG and Yamana Gold Inc. AUY. While Coeur Mining and Scotts MiracleGro sport a Zacks Rank #1, Yamana Gold carries a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Coeur Mining has an expected earnings growth rate of a whopping 138.7% for 2020. The company’s shares have rallied 70% over the past year.

Scotts MiracleGro has an estimated earnings growth rate of 44.5% for the ongoing year. Its shares have appreciated 43% in the past year.

Yamana has projected earnings growth rate of 76.9% for the current year. The company’s shares have surged 74.8% over the past year.

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