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Steel giant Nucor Corp’s (NUE - Analyst Report) earnings of 27 cents per share for the second quarter of 2013 missed the Zacks Consensus Estimate of 30 cents by 10% and were also down roughly 23% from the last year’s earnings of 35 cents. The reported earnings include no inventory-related charges.

Profit for the quarter came in at $85.1 million, down 24% from $112.3 million reported a year ago, hurt by lower pricing.

The Quarter in Details

A 7% year-over-year fall in average sales price weighed on Nucor’s revenues in the second quarter. Revenues decreased 8.6% year over year to roughly $4,666 million, but beat the Zacks Consensus Estimate of $4,547 million. Total tons shipped to outside customers fell 1.4% year over year to 5,839,000 tons in the reported quarter and total mill shipments decreased 3.4% to 5,025,000 tons.

Weakness in sheet steel hurt the operating performance in the steel mills segment in the quarter. However, the steel products segment saw improvements and that helped the segment rebound to profit from prior-quarter’s loss. The raw materials segment also delivered considerable improvement, primarily owing to better performances at the Trinidad DRI facility.  

The average scrap and scrap substitute cost per ton used in the second quarter was $377, down 11.7% from $427 a year ago. Overall operating rates at Nucor’s steel mills were 73%, down 3% compared with the year-ago quarter.

The company had ample liquidity on its books as of Jun 29, 2013, with $749.2 million in cash and cash equivalents, short-term investments and restricted cash. It also has an unused $1.5 billion revolving credit facility that will mature in Dec 2016. Cash flow from operations remained strong at $485 million for six months ended Jun 29, 2013, compared with $446.5 million recorded a year ago.

Nucor's board of directors declared a cash dividend of 36.75 cents per share in Jun 2013, which was the company’s 161st consecutive quarterly cash dividend. The dividend is payable on Aug 9, 2013, to stockholders of record as of Jun 28, 2013.

Guidance

Nucor expects third-quarter 2013 earnings to show modest improvement driven by better sheet steel pricing and strength across automotive and energy markets. However, it continues to see challenges in the construction market. Moreover, Nucor continues to expect increased earnings from its downstream businesses.

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

Other companies in the steel industry with favorable Zacks Rank are Kobe Steel Ltd. (KBSTY), Shiloh Industries Inc. and Nippon Steel & Sumitomo Metal Corp. . All of them hold a Zacks Rank #1 (Strong Buy).

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