CMC Hits Stride with Resilient Q3 Performance, Embarks on Ambitious Growth Strategy
CMS Holdings Inc. (CMC) has reported a solid third-quarter performance, driven by resilient construction and industrial activity in North America. The company's net earnings reached $83.1 million, or $0.73 per diluted share, on net sales of $2 billion, with adjusted earnings standing at $84.4 million, or $0.74 per diluted share.
According to Peter Matt, President and CEO of CMC, the company's strategy is aimed at delivering higher, more stable margins and cash flows through the cycle, as well as a step change in returns on capital. The executive emphasized that successful execution of this strategy will result in margin and cash flow levels significantly above what is currently priced into the shares.
CMC's core EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) stood at $204.1 million, with a core EBITDA margin of 10.1%, both of which improved meaningfully on a sequential basis. Matt attributed this growth to the company's exposure to attractive and growing geographies, strong customer relationships, and exceptional operational capabilities.
The construction activity that drives consumption of CMC's products remained resilient during the quarter, leading to year-over-year growth in finished steel shipments. Despite concerns regarding tariffs and related economic uncertainty, the company experienced stability across its key internal leading indicators, including project bids, new awards, and backlog volumes.
Downstream bid volumes, a gauge of the construction pipeline, remained robust during the quarter and indicated continued accumulation of pent-up demand in nonresidential end markets. This observation is supported by on-the-ground activity and the Dodge Momentum Index, which sits near an all-time high, reflecting improving planning activity in various nonresidential structures.
Paul Lawrence, Senior Vice President and Chief Financial Officer, will elaborate on the charges that affected CMC's net earnings during the quarter. The adjusted results do not include these items, which amount to $1.3 million after-tax.
CMC has embarked on a game-changing strategy intended to enhance its financial profile and turbocharge value-accretive growth. This initiative is designed to deliver higher, more stable margins and cash flows through the cycle as well as a step change in returns on capital. The company believes that successful execution of this strategy will result in margin and cash flow levels well above what is currently priced into its shares.
The strategic actions taken by CMC are expected to drive long-term secular trends, which will fuel construction investment for years to come. With a strong market position and growing demand in the construction industry, the company's leadership believes that it offers a compelling opportunity for investors.
As a leader in most of the markets in which it competes, CMC is poised for future growth. The company's operational capabilities, attractive end-market exposure, and strategic actions make it well-positioned to capitalize on favorable trade policy and industry consolidation. With its robust third-quarter performance and ambitious growth strategy, CMC is expected to drive significant value for its shareholders in the years ahead.
CMC's results demonstrate its ability to navigate the challenges of a rapidly changing market environment while maintaining its competitive position. As the company continues to execute its strategic plan, investors should remain optimistic about its prospects and potential for future growth.
