UPDATE: Credit Suisse Initiates Coverage on Commercial Metals

In a report published Friday, Credit Suisse analyst Nathan Littlewood initiated coverage on

with a Neutral rating, establishing a $22.00 price target. According to the report, as an electric arc furnace based producer of rebar and merchant bar steel products, CMC is heavily exposed to non-residential construction demand, which the analysts see as having further to run in 2014. “CMC's end-market exposure is ~75% construction (with the balance to industrial), relative to its closest peers STLD and NUE at 40% and 60% respectively,” the report noted. “The Architectural Billings Index (ABI) correlates well with CMC's share price (r^2 = 0.76), and continued strength of this market should provide further earnings support into 2014. That said, our analysis suggests that much of the recent Non-Res excitement is already baked into the share price, and we'd need to see 2005-08 type operating margins in order to back fill the current share price with an appropriate level of earnings support.” CMC closed Thursday at $20.11 with shares trading down at 1.95 percent.