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Commercial Metals (CMC +5%) is making a nice move today following Q1 (Nov) results this morning. We think investors are interpreting CMC's Q1 results for this steel producer as better-than-feared. Adjusted EPS was in-line, while revenue fell 4.7% yr/yr to $1.91 bln, but that was better than analyst expectations. The company said its results continue to be hindered by economic uncertainty that has weighed on new construction activity, pressuring steel pricing and margins.

• CMC does not provide specific guidance, but did say it expects Q2 (Feb) results to decline from Q1. However, longer term, management sounded more bullish. CMC is very encouraged by recent conversations with customers about the coming quarters. Outside of construction, measures of both big and small business confidence have improved significantly over the last two months. The palpable shift in sentiment gives CMC confidence that current softness is transient.
• In North America, demand in Q1 was strong, supported by late season construction activity as job sites worked to make up for days lost to weather disruptions earlier in calendar 2024. Shipments of finished steel products increased by 4.4% yr/yr. Looking ahead, the construction pipeline in North America remains healthy as indicated by CMC's downstream bidding activity. Despite good demand in North America, segment adjusted EBITDA margin fell sharply to 12.4% from 16.8% a year ago.
• Its European segment continues to struggle with market conditions similar to recent periods. Long-steel consumption remained substantially below historical levels. CMC explained that improving Polish demand has been largely offset by increased import flows from neighboring nations that have sought an outlet for product not consumed within their home markets.
• Finally, its Emerging Businesses Group saw a 4.4% sales decline and were negatively impacted by an increased sales mix of lower margin products and several large project delays within CMC's Tensar division, which are now expected to commence later in FY25. Additionally, a slowing truck and trailer market has hampered earnings within CMC's Impact Metals business.

Recent bearish guidance from Nucor (NUE) and Steel Dynamics (STLD) likely led to low expectations from investors heading into this report. Our sense is they are pleased that results were not worse. It sounds like Q2 will be another rough quarter, but it seems like investors are focusing on CMC's bullish comments for the quarters ahead of that. CMC is a bit different from other steel producers because it has a huge focus on steel rebar, which is used in construction and infrastructure projects like roads and bridges. Infrastructure spend is expected to pick up in calendar 2025.