Nucor

Nucor (NUE - Analyst Report) is a good growth and income play on the robust steel industry. The company recently issued an increased second-quarter earnings guidance, ranging between $1.75 to $1.80 per share, and analysts followed suit. Nucor’s ROE of 29% reflects solid growth, especially considering that the industry average is at 17%. The steel producer also sports healthy income. Its dividend yield of 1.7% is well above the industry average as the majority of the steel industry pays no dividends. NUE recently declared its 141st dividend in the amount of 52 cents per share, which is the sum of a regular quarterly dividend of 32 cents and a supplemental dividend of 20 cents.

Company Description

Nucor and its subsidiaries manufacture steel products, with operating facilities primarily in the U.S. and Canada. The company operates in two segments, Steel Mills and Steel Products. Its products include carbon and alloy steel. Nucor was founded in 1940 and is based in Charlotte, North Carolina.

Acquisition Announcement

The steel maker recently announced today that its wholly owned subsidiary, Harris Steel, signed an agreement to buy all of the issued and outstanding common shares of Ambassador Steel Corporation ("Ambassador"), for a cash purchase price of approximately $185,000,000. Nucor noted that the transaction will also include the shares of Ambassador's affiliate, Delta Erecting, Inc.

"The acquisition of Ambassador continues Nucor's downstream growth initiatives and is an opportunity to enhance Nucor's national footprint in the rebar fabrication market," said Daniel R. DiMicco, Nucor's Chairman, CEO and President.

NUE Hikes Guidance and Analysts Followed Suit

The company stated that strong shipments and higher margins have increased the earnings guidance for its second quarter. Nucor now expects second quarter net earnings to range between $1.75 to $1.80 per share, a substantial boost from its previous outlook of $1.55 to $1.60 per share.

Wall Street is in agreement. Five out of 9 covering analysts have second-quarter earnings projections pegged at $1.79 per share, versus last month’s $1.69.

Full-year estimates have also been on the rise. Seven out of 12 covering analysts are forecasting year 2008 earnings of $6.88 per share, up from last month’s $6.69. One of those analysts bumped up the estimate further to $6.90, and the most accurate expectation is even higher at $7.01.

141st Dividend

NUE recently declared its 141st dividend in the amount of 52 cents per share, which is the sum of a regular quarterly dividend of 32 cents and a supplemental dividend of 20 cents. The company noted that the dividend is payable on August 11, 2008 to stockholders of record on June 30, 2008.

Nucor said the supplemental dividend is based primarily on its continued strong results, adding that the payment of the supplemental dividend in any future period will depend upon many factors, including earnings, cash flows and financial position.

The company’s dividend yield of 1.7% is well above the industry average as the majority of the steel industry pays no dividends.

Strong Growth Compared to the Industry

Nucor’s return on equity (ROE) of 29% reflects solid growth, especially considering that the industry average is at 17%. Earnings per share are expected to grow by 10% over the next 3 – 5 years, versus the industry average of 9%.

Record Results

In mid-April, the company posted record first-quarter net earnings for the fifth consecutive year. Earnings per share of $1.41 improved on last year’s $1.26 and exceeded the consensus estimate by 8%. The company mentioned that the increase in earnings per share from the first quarter of 2007 is partially due to the reduced number of shares outstanding as a result of stock repurchases made in 2007.

Consolidated net sales jumped 32% to a record $4.97 billion from the year-ago level of $3.77 billion.

Read the full analyst report on NUE