Commercial Metals heads into its fiscal fourth-quarter report with a promise to keep. Last quarter, management delivered its best core EBITDA in three years yet still had to explain away a messy stretch in North American Steel, blaming a pileup of maintenance outages, wet weather and an unexpected jump in scrap costs. The company described those problems as temporary and reaffirmed its outlook rather than raising it. That outlook implied a sequential EBITDA lift of roughly $40 million to $50 million in the final quarter. The October 15 release, due before the opening bell, is where that claim either holds up or falls apart.
The Street has largely accepted management's version of events. Consensus calls for earnings of $1.97 per share, up about 44% from $1.37 a year ago and a clear step up from the $1.73 reported last quarter. Revenue is expected to reach $2.44 billion, up about 15% year over year but slightly below the $2.48 billion posted in the third quarter. That mix matters. Analysts are not counting on more sales to drive the gain. They are counting on better margins: mills running without outages, scrap costs settling, and price increases sticking. If earnings rise while revenue stays flat, it would show the third-quarter problems really were one-time costs and not a sign of weaker demand.
North American Steel is the main test. Elevated outages hit seven of ten mills in the third quarter and cost about $20 million, with weather taking another $10 million or so. Operating rates that return to normal should recover much of that on their own. Metal margins are the bigger question. Before the third quarter, steadily widening margins had been the core of the bull case, and the scrap squeeze interrupted that run. Signs that spreads are widening again would support the story. Signs that rivals are still cutting prices would challenge it. Management had already pointed to rising imports, especially from South Korea, and to new domestic rebar capacity from Hibar and Pacific Steel. Recent trade case wins covering about 500,000 tons should help over time, but this quarter will show whether they are protecting prices yet.
Construction Solutions carries a separate burden. The precast EBITDA target of $165 million to $175 million has stayed the same all year, but after a soft third quarter it now requires a heavy fourth-quarter catch-up. Backlog growth also slowed from high single digits to low single digits, which makes the precast numbers a useful read on demand going into fiscal 2027. Europe should help less this time, since management flagged a sequential decline once the $20.4 million CO2 credit drops out. On the positive side, updates on Arizona 2 utilization, Steel West Virginia's commissioning, and the TAG program running ahead of its $150 million target could still strengthen the longer-term case.
The stock has not given management the benefit of the doubt. Shares have fallen about 10% since the last report while the S&P 500 gained more than 5%. At around $65, the stock trades below its 200-day moving average near $70 and sits in the lower part of its post-earnings range of roughly $60 to $77. Sentiment is mildly bullish and barely changed from last quarter. Together, that suggests investors are cautious, not confident. Deleveraging is a real swing factor. Net leverage was 2.1x last quarter, and moving to the 2.0x level management identified would allow larger buybacks and growth acquisitions, alongside a roughly $200 million drop in capital spending next year.
The central question is whether the third quarter was a detour or the start of a new trend. A clean fourth quarter, with outages behind it, steel spreads widening again and precast catching up, would back management's view and could make the stock's slide look like an overreaction. Continued scrap pressure, discounting tied to imports or a precast shortfall would suggest the margin expansion story is peaking just as new competing capacity arrives.