I'm probably closer to bearish on steel than bullish, but I do see some select opportunities that are worth a look, and Commercial Metals (CMC)
seems to be one of them. Unlike the market for flat-rolled steel, I see
a better supply/demand balance in CMC's core long markets, particularly
given how consolidated the U.S. rebar market is now after the CMC-Gerdau (GGB)
deal in 2018. Add in some growth from infrastructure projects, decent
non-resi trends, improving fabrication results, and some opportunities
for network optimization, and I think CMC has some potential.
I
think CMC shares could be more than 10% undervalued now, with long-term
annualized return potential in the double digits. Certainly a lot rides
on whether above-trend metal spreads can be maintained, but CMC
management has made several smart moves and seems underappreciated
relative to flat producers facing more structural challenges.
Continue here:
Commercial Metals Looks Mispriced Given Generally Favorable Market Trends
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