Nucor (NUE) Issues Upbeat Q2 Earnings Guidance, Shares Pop

Nucor Corporation’s NUE shares rallied yesterday after it provided strong earnings guidance for second-quarter 2018. The steel giant expects earnings for the quarter in the band of $2.05 to $2.10 per share. That is a significant increase from $1.10 per share recorded in the previous quarter and $1.00 per share it earned a year ago. Analysts polled by Zacks currently expect earnings of $1.69 per share for the quarter.

The Charlotte-based company’s shares rose around 2.6% to close at $68.53 yesterday. Nucor’s shares are up 7.8% so far this year, outperforming its industry’s 6% rise.

 

Nucor noted that the expected increase in second-quarter performance on a sequential comparison basis is due to a significant improvement in performance of the steel mills segment on the back of higher average selling prices and higher profitability across all steel mill product groups, especially sheet mills. The company also sees sequentially higher profitability across its steel products and raw materials segments in the second quarter.

The company noted that its improved earnings reflect stronger market conditions, which it believes have been favorably impacted by tax reform, deregulation and higher, stable oil prices.

Nucor also believes that there is sustainable strength in steel end-use markets based on the current steel market fundamentals and communications with its customers. The company also said that its steel mill and steel product backlogs have trended upward since the start of 2018 and remain strong. It expects strong performance and profitability to continue through the balance of the year.   

Nucor has been focusing on growth through strategic acquisitions and is well positioned to gain from such efforts to expand its business. The company also remains committed to expand its production capabilities.

The company’s board, last month, cleared the construction of a galvanizing line at its sheet mill in Arkansas. The move will enable Nucor to expand into a wider and more diverse set of strategic end-market applications. The company is investing $240 million in the new galvanizing line that will have an annual capacity of around 500,000 tons and is expected to come online in the first half of 2021.

This project is in sync with the company’s previous investment of $230 million which is currently underway to construct a specialty cold mill complex at Nucor Steel Arkansas.

Both these projects will support the company to efficiently produce products beyond the capability of any North American mill. Further, it will help the company meet demand for advanced high-strength steel products. The company also plans to build additional galvanizing lines at other sheet mills as part of its initiative to further expand the sheet business.

Nucor Corporation Price and Consensus

 

Nucor Corporation Price and Consensus | Nucor Corporation Quote

Zacks Rank & Stocks to Consider

Nucor currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks worth considering in the basic materials space include Westlake Chemical Corporation WLK, The Chemours Company CC and Celanese Corporation CE, each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Westlake Chemical has an expected long-term earnings growth rate of 12.2%. Its shares have rallied roughly 76% over a year.

Chemours has an expected long-term earnings growth rate of 15.5%. The company’s shares have shot up around 36% in a year.

Celanese has an expected long-term earnings growth rate of 8.9%. Its shares have rallied roughly 27% over a year.

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