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Nucor Sees Higher Q3 Earnings, But Guidance Falls Short
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Nucor (NUE - Free Report) sees higher earnings in the third quarter of 2016 on improved prices and favorable impact from reduced steel imports as a result of trade actions. But its guidance for the quarter fell short of expectations.
The steel producer sees earnings for the third quarter to be in the band of 85 cents to 90 cents per share. That is an increase from 71 cents a share it earned a year ago and 73 cents per share recorded in the previous quarter. Analysts polled by Zacks currently expect earnings of $1.09 a share on an average for the quarter.
Nucor’s third-quarter guidance include an estimated LIFO expense of $21.8 million or 4 cents per share versus an expense of $19 million or 3 cents per share in the second quarter of 2016 and a LIFO credit of $137 million or 27 cents per share in the third quarter of 2015.
The Charlotte-based company’s shares fell around 1.5% to close at $45.35 yesterday.
Nucor said that the expected improvement in third-quarter earnings on a sequential comparison basis mainly reflects improved performance in its Steel Mills and Raw Materials divisions.
Profitability of the company’s sheet mills is expected to improve in the third quarter on higher average selling prices. The Steel Mills unit is expected to gain from low service center inventory levels and reduced scrap costs through the balance of 2016. While Nucor is seeing continued momentum in the automotive market, weakness persists across energy, heavy equipment and agricultural markets. While demand for cold-rolled and galvanized sheet products has been strong, the company is witnessing weak demand for hot-rolled sheet products since the first half of the year.
The company also expects a significant improvement in performance in the Raw Materials segment in the third quarter compared with the second on better performance in its direct reduced iron (“DRI”) facilities. However, Nucor envisions reduced profitability in its Steel Products segment on a sequential comparison basis in the third quarter on margin compression. The company continues to witness gradual improvement in non-residential construction markets.
Steel market conditions have improved lately, driven by favorable developments on steel trade cases in the recent past that have resulted in a year over year decline in steel imports in the first seven months of 2016. Steel prices have recovered of late, helped by punitive trade actions that led to levy of tariffs on imports.
U.S. steel makers continue to actively press the U.S. regulators to stop unfair trade practices and enforce new trade laws to rescue the crisis-hit American steel industry.
Nucor is a Zacks Rank #3 (Hold) stock.
Better-ranked companies in the steel space are ArcelorMittal (MT - Free Report) , Ternium S.A. (TX - Free Report) and Angang Steel Company Limited . While ArcelorMittal sports a Zacks Rank #1 (Strong Buy), both Ternium and Angang Steel hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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Nucor Sees Higher Q3 Earnings, But Guidance Falls Short
Nucor (NUE - Free Report) sees higher earnings in the third quarter of 2016 on improved prices and favorable impact from reduced steel imports as a result of trade actions. But its guidance for the quarter fell short of expectations.
The steel producer sees earnings for the third quarter to be in the band of 85 cents to 90 cents per share. That is an increase from 71 cents a share it earned a year ago and 73 cents per share recorded in the previous quarter. Analysts polled by Zacks currently expect earnings of $1.09 a share on an average for the quarter.
Nucor’s third-quarter guidance include an estimated LIFO expense of $21.8 million or 4 cents per share versus an expense of $19 million or 3 cents per share in the second quarter of 2016 and a LIFO credit of $137 million or 27 cents per share in the third quarter of 2015.
The Charlotte-based company’s shares fell around 1.5% to close at $45.35 yesterday.
NUCOR CORP Price
NUCOR CORP Price | NUCOR CORP Quote
Nucor said that the expected improvement in third-quarter earnings on a sequential comparison basis mainly reflects improved performance in its Steel Mills and Raw Materials divisions.
Profitability of the company’s sheet mills is expected to improve in the third quarter on higher average selling prices. The Steel Mills unit is expected to gain from low service center inventory levels and reduced scrap costs through the balance of 2016. While Nucor is seeing continued momentum in the automotive market, weakness persists across energy, heavy equipment and agricultural markets. While demand for cold-rolled and galvanized sheet products has been strong, the company is witnessing weak demand for hot-rolled sheet products since the first half of the year.
The company also expects a significant improvement in performance in the Raw Materials segment in the third quarter compared with the second on better performance in its direct reduced iron (“DRI”) facilities. However, Nucor envisions reduced profitability in its Steel Products segment on a sequential comparison basis in the third quarter on margin compression. The company continues to witness gradual improvement in non-residential construction markets.
Steel market conditions have improved lately, driven by favorable developments on steel trade cases in the recent past that have resulted in a year over year decline in steel imports in the first seven months of 2016. Steel prices have recovered of late, helped by punitive trade actions that led to levy of tariffs on imports.
U.S. steel makers continue to actively press the U.S. regulators to stop unfair trade practices and enforce new trade laws to rescue the crisis-hit American steel industry.
Nucor is a Zacks Rank #3 (Hold) stock.
Better-ranked companies in the steel space are ArcelorMittal (MT - Free Report) , Ternium S.A. (TX - Free Report) and Angang Steel Company Limited . While ArcelorMittal sports a Zacks Rank #1 (Strong Buy), both Ternium and Angang Steel hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>