Will TAG Program Drive Commercial Metals' Next Phase of Growth?
Commercial Metals Company CMC continues to drive durable margin improvement through its TAG Transform, Advance, Grow (“TAG”) program. The company is benefiting from network optimization and commercial initiatives under the program.
The program focuses on driving higher through-the-cycle margins, earnings, cash flows and ROIC. CMC now expects run-rate gross EBITDA benefits to exceed$250 million by the end of fiscal 2026 from the program.
Launched in 2024, the TAG program aims to drive consistency across all areas of the business. The program is designed to optimize logistics, reduce input consumption, lower costs and boost energy efficiency. It includes more than 150 individual projects across the company’s business segments and support functions. The program is already fully integrated into CMC's continuous improvement culture. TAG is standardizing processes and extending expertise across the enterprise. It has enabled faster, data-driven decision-making.
The company expects gross annual EBITDA benefits to be more than $350 million by the end of fiscal 2027. Benefits from the TAG program, along with strong market dynamics and effective operational execution, will generate momentum in CMC's existing businesses.
Backed by its focus on transformation, the company expects to generate structurally higher margins and enhanced free cash flow. CMC expects its fiscal 2029 core EBITDA to be in the range of $1.65 billion to $1.80 billion, marking a surge of 106% at midpoint from $837 million delivered in fiscal 2025. Core EBITDA margin is expected to be in the range of 15-16%.
Growth Strategies by Other Steel Stocks
Cleveland-Cliffs Inc. CLF is investing $1 billion to modernize its Middletown Works facility in Ohio, supported by a $500 million award from the U.S. Department of Energy (“DOE”). Cleveland-Cliffs and the DOE will each fund $500 million of the project. The investment is expected to be deployed over the next four years while maintaining uninterrupted steel production at the facility. The project represents a rescoping of Cleveland-Cliffs’ previously planned decarbonization initiative at Middletown Works.
Carpenter Technology’s CRS brownfield expansion finished fiscal 2026 on schedule and within budget. The project is slated for completion by the start of fiscal 2028, accelerating CRS’ earnings growth profile.
Carpenter Technology expects cash generation to further increase beyond fiscal 2027, driven by earnings expansion and profitability contributions from the brownfield project. Looking further ahead, Carpenter Technology set a fiscal 2029 operating income target of $1.2 to $1.3 billion, marking a solid jump from the $702 million reported in fiscal 2026. The upside will be fueled by a robust underlying demand environment and the added capacity from the brownfield expansion.
CMC’s Price Performance, Valuations & Estimates
Commercial Metals shares have gained 12.5% in the past year compared with the industry’s 73.7% growth. In comparison, the Zacks Basic Materials sector and the S&P 500 have returned 20.4% and 14.8%, respectively.
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Commercial Metals is currently trading at a forward price/sales ratio of 0.75 compared with the industry's 1.86.
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The Zacks Consensus Estimate for Commercial Metals’ fiscal 2026 sales is pinned at $9.18 billion, indicating a 13.9% year-over-year jump. The consensus mark for the year’s earnings is pegged at $6.62 per share, indicating a year-over-year upsurge of 111.5%.
The Zacks Consensus Estimate for fiscal 2027 sales implies 7.3% year-over-year growth. The same for earnings suggests a dip of 9.2%.
EPS estimates for fiscal 2026 and 2027 have moved south over the past 60 days.
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CMC currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
