The past couple of years have been rough ones for the steel sector, but stock prices have improved pretty noticeably in recent months on optimism that improving conditions in the market aren't yet another false start for the long-predicted recovery. Relatively speaking, Commercial Metals (NYSE:CMC) has held up all right - the shares haven't been as strong as those of Steel Dynamics (NASDAQ:STLD), but they've done quite a bit better than those of Gerdau (NYSE:GGB) and U.S. Steel (NYSE:X), while also outperforming AK Steel (NYSE:AKS) and Nucor (NYSE:NUE) over the past year.
Can they keep it going? This fiscal year should be the low point of
the current cycle and the outlook for non-residential construction is
still positive, but there's a lot of capacity out there, the dollar is
still pretty strong, and competition from imports (Turkey in particular
in the case of Commercial Metals) is still a risk. Although the rally in
the shares makes it harder to call them a bargain today, it's worth
remembering that cyclical recoveries are a lot like the declines - they
tend to go further, faster, than you might initially think.
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Buoyed By Better Sentiment, Can Commercial Metals Keep It Going?