CMC dividend rises 11% as core EBITDA surges 114%
Adjusted EPS missed estimates on acquisition charges, but underlying operations show strong margin expansion and earnings growth
Commercial Metals Company raised its quarterly dividend 11% to $0.20 per share even after second-quarter earnings missed Wall Street expectations, as the steel manufacturer reported a 114% surge in core EBITDA and expanding profit margins that suggest underlying operations remain robust.
The Irving, Texas-based company reported adjusted earnings of $130.1 million, or $1.16 per share, for the fiscal second quarter ended February 28, missing the average analyst estimate of $1.28. The shortfall stemmed from $37.1 million in after-tax acquisition and litigation charges related to the company's recent strategic bolt-on acquisitions.
Despite the earnings miss, CMC's consolidated core EBITDA jumped to $297.5 million, a 114% year-over-year increase, with operating margins expanding 610 basis points to 14.0%. Revenue reached $2.13 billion, exceeding analyst forecasts of approximately $2.09 billion.
The strong EBITDA performance was driven primarily by CMC's North America Steel segment, where EBITDA surged 97% year-over-year. The company's newly integrated precast platform contributed $33.6 million in adjusted EBITDA during the quarter, excluding a $6.7 million purchase accounting charge, demonstrating early momentum from CMC's more than $2.5 billion in recent acquisitions, including the CP&P and Foley transactions.
"The board's decision to increase the dividend for the 246th consecutive quarter reflects confidence in our financial position and cash generation capabilities," the company stated in its earnings announcement. The increased dividend will be paid April 15 to shareholders of record as of April 6.
CMC shares have declined approximately 17% over the past month, trading at around $62.40 as of Wednesday morning, down from $74.91 in late February. The stock's relative strength index has fallen to 33, entering oversold territory and suggesting the earnings miss may have been partially anticipated by investors.
Analysts had maintained a largely positive outlook on CMC ahead of earnings, with seven rating it a buy or strong buy against four hold ratings and no sell or strong sell recommendations. The consensus price target stands at $81.40, representing significant upside from current levels.
The steel sector faces ongoing challenges, including global overcapacity estimated at 640 million metric tons in 2025, with China accounting for more than half of that excess. However, regional slab prices increased $15-35 per ton in March due to strengthening demand and supply shortages, providing some tailwind for domestic producers.
Looking ahead, CMC provided guidance for the third quarter, indicating that core EBITDA is expected to "increase meaningfully" from second-quarter levels. Management also noted that seasonal factors typically provide a tailwind in the third quarter, which could further support operating performance.
KeyBanc Capital Markets adjusted its fiscal 2026 estimates following the release, lowering its second-quarter EBITDA projection to $274 million and reducing its full-year earnings per share estimate to $6.95 from $7.75, citing the integration expenses and purchase accounting adjustments.
Despite near-term headwinds from acquisition integration costs, CMC's expanding margins, double-digit EBITDA growth, and continued dividend increases position the company to benefit from any recovery in steel demand expected in 2026. The World Steel Association has forecast modest growth in global steel consumption this year, which could provide additional support for pricing and volumes.