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Nucor (NUE) Q2: Will Its Earnings Beat on Improved Pricing?
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Nucor Corporation (NUE - Free Report) is gearing up to release its second-quarter 2016 results ahead of the bell on Jul 21.
In the last quarter, the steel giant had delivered a negative earnings surprise of 18.52%. Its revenues fell by double digits year over year on lower pricing, but beat expectations.
Nucor has posted positive earnings surprises in three of the trailing four quarters with an average beat of 47.87%. Let’s see how things are shaping up for this announcement.
Factors to Watch For
Nucor is expected to gain from improved prices and favorable impact from reduced steel imports in the June quarter. Nucor, last month, issued upbeat guidance for second-quarter 2016. The company expects earnings for the quarter to be in the band of 65 cents to 70 cents per share, an increase from 39 cents a share it earned a year ago and 22 cents per share recorded in the previous quarter.
The company expects improved performance in its Steel Mills division in the second quarter vis-à-vis the first quarter on increased prices and higher volumes. Profitability of its sheet, bar and plate mills is expected to improve sequentially in the quarter. The sheet mills, which is benefiting from lower inventory levels in the supply chain, is expected to see the biggest improvement in profitability. The company also said that it saw significant improvement in average sheet product prices during the second quarter.
Nucor also expects better performance in its Downstream Products unit in the second quarter compared to the first on improvement in non-residential construction markets. For the Raw Materials segment, the company expects improved profitability in the second quarter on higher pricing in its scrap processing businesses and direct reduced iron (“DRI”) facilities.
Steel market conditions in the U.S. have improved lately, driven by favorable rulings (leading to levy of tariffs on imports) on steel trade cases in the recent past. The company is expected to benefit from the favorable impact of reduced steel imports as a result of these punitive actions. According to the American Iron and Steel Institute ("AISI"), total steel imports for the first five months of 2016 dropped 31% from the same period a year ago.
Moreover, Nucor should gain from continued strength in the automotive market. Demand from this key end-market (especially for the company’s sheet steel products) remains healthy, reflected by contract awards by automotive OEM customers. Nucor, last month, entered into a joint venture with JFE Steel Corporation of Japan to build and operate a plant in Mexico that will supply sheet steel to the country’s growing automotive market.
Nucor's volumes in the automotive market climbed roughly 20% sequentially in first-quarter 2016. The company remains focused on achieving greater penetration of this major market in 2016.
Our proven model does not conclusively show that Nucor will beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below.
Zacks ESP: Nucor has an Earnings ESP 0.00%. That is because both the Most Accurate Estimate and the Zacks Consensus Estimate stand at 70 cents per share.
Zacks Rank: Nucor has a Zacks Rank #2, which increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions.
Stocks that Warrant a Look
Here are some companies in the steel space that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
AK Steel Holding Corp. has an Earnings ESP of +33.33% and a Zacks Rank #2.
Ryerson Holding Corp. (RYI - Free Report) has an Earnings ESP of +7.69% and a Zacks Rank #2.
Steel Dynamics Inc. (STLD - Free Report) has an Earnings ESP of +1.79% and a Zacks Rank #2.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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Nucor (NUE) Q2: Will Its Earnings Beat on Improved Pricing?
Nucor Corporation (NUE - Free Report) is gearing up to release its second-quarter 2016 results ahead of the bell on Jul 21.
In the last quarter, the steel giant had delivered a negative earnings surprise of 18.52%. Its revenues fell by double digits year over year on lower pricing, but beat expectations.
Nucor has posted positive earnings surprises in three of the trailing four quarters with an average beat of 47.87%. Let’s see how things are shaping up for this announcement.
Factors to Watch For
Nucor is expected to gain from improved prices and favorable impact from reduced steel imports in the June quarter. Nucor, last month, issued upbeat guidance for second-quarter 2016. The company expects earnings for the quarter to be in the band of 65 cents to 70 cents per share, an increase from 39 cents a share it earned a year ago and 22 cents per share recorded in the previous quarter.
The company expects improved performance in its Steel Mills division in the second quarter vis-à-vis the first quarter on increased prices and higher volumes. Profitability of its sheet, bar and plate mills is expected to improve sequentially in the quarter. The sheet mills, which is benefiting from lower inventory levels in the supply chain, is expected to see the biggest improvement in profitability. The company also said that it saw significant improvement in average sheet product prices during the second quarter.
Nucor also expects better performance in its Downstream Products unit in the second quarter compared to the first on improvement in non-residential construction markets. For the Raw Materials segment, the company expects improved profitability in the second quarter on higher pricing in its scrap processing businesses and direct reduced iron (“DRI”) facilities.
Steel market conditions in the U.S. have improved lately, driven by favorable rulings (leading to levy of tariffs on imports) on steel trade cases in the recent past. The company is expected to benefit from the favorable impact of reduced steel imports as a result of these punitive actions. According to the American Iron and Steel Institute ("AISI"), total steel imports for the first five months of 2016 dropped 31% from the same period a year ago.
Moreover, Nucor should gain from continued strength in the automotive market. Demand from this key end-market (especially for the company’s sheet steel products) remains healthy, reflected by contract awards by automotive OEM customers. Nucor, last month, entered into a joint venture with JFE Steel Corporation of Japan to build and operate a plant in Mexico that will supply sheet steel to the country’s growing automotive market.
Nucor's volumes in the automotive market climbed roughly 20% sequentially in first-quarter 2016. The company remains focused on achieving greater penetration of this major market in 2016.
NUCOR CORP Price and EPS Surprise
NUCOR CORP Price and EPS Surprise | NUCOR CORP Quote
Earnings Whispers
Our proven model does not conclusively show that Nucor will beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below.
Zacks ESP: Nucor has an Earnings ESP 0.00%. That is because both the Most Accurate Estimate and the Zacks Consensus Estimate stand at 70 cents per share.
Zacks Rank: Nucor has a Zacks Rank #2, which increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions.
Stocks that Warrant a Look
Here are some companies in the steel space that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
AK Steel Holding Corp. has an Earnings ESP of +33.33% and a Zacks Rank #2.
Ryerson Holding Corp. (RYI - Free Report) has an Earnings ESP of +7.69% and a Zacks Rank #2.
Steel Dynamics Inc. (STLD - Free Report) has an Earnings ESP of +1.79% and a Zacks Rank #2.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>