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Bull of the Day: Nucor (NUE)

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Headquartered in Charlotte, North Carolina, Nucor (NUE)is a leading producer of structural steel, steel bars, steel joists, steel deck and cold finished bars. The company has approximately 200 operating facilities. They are also the largest recycler in the United States.

The company has grown organically as well as through strategic acquisitions over the years. They currently operate in three segments – the Steel Mills segment (78% of total tons sold in 2016), the Steel Products segment (22%) and the Raw Materials segment.

Solid Quarterly Results and Upgraded Guidance

The company swung to profit in Q4, thanks to increased shipments and higher steel prices. During the quarter, earnings were  $0.50 per share compared with a loss of $0.59 per share in the same quarter a year ago. Earnings were significantly ahead of the Zacks Consensus Estimate of $0.34 per share.

Sales increased approximately 14% year over year and also beat the Zacks Consensus Estimate.

The steel producer expects Q1 as well as FY 2017 earnings to improve significantly from their 2016 levels.

Returning Cash to Shareholders

The company continues to boost shareholder value through dividends and share buybacks. They have increased their base dividend for 44 consecutive years, irrespective of the commodity cycle. They retuned $4.0 Billion to shareholders during 2004-2008 up-cycle and another $3.8 billion during 2009-2016 down-cycle.

Surging Estimates

Analysts have significantly raised their estimates for the company after strong earnings and upgraded guidance. Zacks Consensus Estimates for the current and next year are now $4.23 per share and $4.44 per share, up from $3.71 and $4.61, before the results.

 

 

 

Time to Buy after Recent Weakness?

We have seen a reversal of the Trump trade over the past few weeks, thanks to investors’ worries whether the President will be able to implement his economic agenda anytime soon.

While there is uncertainty regarding Trump’s agenda, global growth has been picking up of late. China has stabilized and its manufacturing has been gaining momentum. This scenario should help steel makers all over the world.

Further, President Trump is expected to take action to prevent dumping of steel by China, which will benefit US steel producers. And, unlike healthcare, there is a greater possibility of a bilateral agreement on infrastructure spending, even though the timing remains uncertain as of now.

Bottom-Line

The steel industry is currently ranked #20 out of 265 Zacks Industries (Top 8%), suggesting near-to-mid term outperformance. Additionally with a dividend yield of 2.53%, expected EPS growth rate of 12% (3-5 years) and a top Zacks Rank, this stock is worth a look.

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