Commercial Metals to Sell Raw Materials Trading & Steel Units

A generic image of a stock chart on a display Credit: Shutterstock photo

Commercial Metals CompanyCMC has declared plans to exit its International Marketing and Distribution Segment. As part of this plan, the company and its fully-owned subsidiary, CMC Cometals International Sarl have landed a deal to divest its raw materials trading unit (CMC Cometals) to Traxys North America L.L.C. and Traxys Europe S.A., which are affiliates of The Carlyle Group.

The deal is expected to close later this summer and is subject to customary closing conditions and regulatory approvals.

The Cometals team has a strong track record of supplier and customer service that fits well with Traxys' activities and broadens their product offerings. As per the new ownership structure, the Cometals team will continue to operate from its current locations in the U.S., China, Benelux and Russia.

Additionally, Commercial Metals plans to sell its Cometals steel division in Irving, TX, which markets steel products, as well as restructure and sell the remaining trading operations in Asia and Australia.

These divestments will allow the company to focus on its core steel manufacturing operations in the U.S. and Poland, which are well positioned to meet the robust demand for steel for non-residential construction and infrastructure.

Commercial Metals has underperformed the Zacks categorized Steel-Producers industry over the last one year. The company's shares have moved up around 16.2% over this period, compared with roughly 28.5% gain recorded by the industry.

Commercial Metals anticipates strong demand supported by strong levels of bidding in its fabrication business. The company expects shipment levels to grow in the fiscal third quarter due to strong construction season in both the U.S. and Poland.

The company believes that the new administrative policies of U.S. will support economic growth through tax reform, a reduced regulatory environment and more rigorous enforcement of trade actions, among others. Also, the company is well-positioned to capitalize on the benefits from these actions.

However, margin pressure is expected to continue as imports make it difficult to increase selling prices for the company's products in sync with a rise in scrap costs.

Commercial Metals Company Price and Consensus

Commercial Metals Company Price and Consensus | Commercial Metals Company Quote

Zacks Rank & Key Picks

Commercial Metals currently carries a Zacks Rank #3 (Hold).

Some top-ranked companies in the basic material space include BASF SE BASFY , The Chemours Company CC and Kronos Worldwide Inc KRO . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

BASF has expected long-term growth of 8.9%.

Chemours has expected long-term growth of 15.5%.

Kronos has expected long-term growth of 5%.

Zacks' 2017 IPO Watch List

Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.

One has driven from 0 to a $68 billion valuation in 8 years. Four others are a little less obvious but already show jaw-dropping growth. Download this IPO Watch List today for free >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

BASF SE (BASFY): Free Stock Analysis Report

Kronos Worldwide Inc (KRO): Free Stock Analysis Report

Chemours Company (The) (CC): Free Stock Analysis Report

Commercial Metals Company (CMC): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.