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Nucor (NUE) Raised to Strong Buy on Upbeat Q1 Outlook
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On Mar 28, Zacks Investment Research upgraded steel giant Nucor (NUE - Free Report) to a Zacks Rank #1 (Strong Buy). Going by the Zacks model, companies sporting a Zacks Rank #1 have strong chances of outperforming the broader market.
Why the Upgrade?
Nucor swung to a profit in fourth-quarter 2016. Earnings and sales for the quarter topped the respective Zacks Consensus Estimate.
The company recently provided upbeat guidance for the first quarter of 2017. It sees earnings for the quarter to be in the band of $1.10 to $1.15 per share. That is a significant increase from 50 cents per share recorded in the previous quarter and 27 cents a share it earned a year ago.
Nucor said that the expected increase in first-quarter earnings on a sequential comparison basis mainly reflects improved performance in its Steel Mills segment. The improved profitability of this segment has been driven by better performance of the company’s sheet and plate mills.
The company also noted that it is seeing renewed growth in demand across non-residential construction and energy markets as well as continued strength in the automotive market.
Estimates for Nucor for the first quarter have been going up of late. Over the past month, the Zacks Consensus Estimate for the quarter has increased by around 49% to $1.13 per share.
Nucor is well placed to gain from its efforts to grow its business through acquisitions. Notably, the acquisition of Gallatin Steel has strengthened the company’s foothold in the Midwest market and has provided ample opportunities to boost shareholder value. The buyout of Joy Global's steel plate mill will also enable Nucor to capture a growing share of higher value-added plate products.
Moreover, the buyout of Chicago-based Independence Tube Corporation has allowed Nucor to offer a broader selection of products to its fabricator and service center customers and reinforced the company's foothold in key non-residential construction end-use market.
Nucor, earlier this year, also closed its purchase of steel electrical conduit maker, Republic Conduit, from Luxembourg-based Tenaris S.A. for $335 million. The acquisition makes Nucor the market leader in steel conduits. Moreover, the company acquired Southland Tube for $130 million in Jan 2017. The buyout strengthens Nucor’s foothold in the hollow structural section (“HSS”) steel tubing market. The recently announced purchase of the assets of Omega Joist will also allow Nucor to grow its joist and decking business in Canada.
Demand in the automotive market also remains healthy and is expected to improve, in turn, providing more strength to the company’s top line. Nucor remains focused on achieving greater penetration of this major market. Nucor has 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.
Price Performance
Nucor has underperformed the Zacks categorized Steel-Producers industry over a year. While the company's shares rose 26%, the industry witnessed a gain of 41% over the same time frame.
U.S. Steel has an expected long-term growth of 8%.
Ternium has an expected long-term growth of roughly 18.4%.
Angang Steel has an expected earnings growth rate of 45.3% for the current year.
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Nucor (NUE) Raised to Strong Buy on Upbeat Q1 Outlook
On Mar 28, Zacks Investment Research upgraded steel giant Nucor (NUE - Free Report) to a Zacks Rank #1 (Strong Buy). Going by the Zacks model, companies sporting a Zacks Rank #1 have strong chances of outperforming the broader market.
Why the Upgrade?
Nucor swung to a profit in fourth-quarter 2016. Earnings and sales for the quarter topped the respective Zacks Consensus Estimate.
The company recently provided upbeat guidance for the first quarter of 2017. It sees earnings for the quarter to be in the band of $1.10 to $1.15 per share. That is a significant increase from 50 cents per share recorded in the previous quarter and 27 cents a share it earned a year ago.
Nucor said that the expected increase in first-quarter earnings on a sequential comparison basis mainly reflects improved performance in its Steel Mills segment. The improved profitability of this segment has been driven by better performance of the company’s sheet and plate mills.
The company also noted that it is seeing renewed growth in demand across non-residential construction and energy markets as well as continued strength in the automotive market.
Estimates for Nucor for the first quarter have been going up of late. Over the past month, the Zacks Consensus Estimate for the quarter has increased by around 49% to $1.13 per share.
Nucor Corporation Price and Consensus
Nucor Corporation Price and Consensus | Nucor Corporation Quote
Nucor is well placed to gain from its efforts to grow its business through acquisitions. Notably, the acquisition of Gallatin Steel has strengthened the company’s foothold in the Midwest market and has provided ample opportunities to boost shareholder value. The buyout of Joy Global's steel plate mill will also enable Nucor to capture a growing share of higher value-added plate products.
Moreover, the buyout of Chicago-based Independence Tube Corporation has allowed Nucor to offer a broader selection of products to its fabricator and service center customers and reinforced the company's foothold in key non-residential construction end-use market.
Nucor, earlier this year, also closed its purchase of steel electrical conduit maker, Republic Conduit, from Luxembourg-based Tenaris S.A. for $335 million. The acquisition makes Nucor the market leader in steel conduits. Moreover, the company acquired Southland Tube for $130 million in Jan 2017. The buyout strengthens Nucor’s foothold in the hollow structural section (“HSS”) steel tubing market. The recently announced purchase of the assets of Omega Joist will also allow Nucor to grow its joist and decking business in Canada.
Demand in the automotive market also remains healthy and is expected to improve, in turn, providing more strength to the company’s top line. Nucor remains focused on achieving greater penetration of this major market. Nucor has 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.
Price Performance
Nucor has underperformed the Zacks categorized Steel-Producers industry over a year. While the company's shares rose 26%, the industry witnessed a gain of 41% over the same time frame.
Other Stocks to Consider
Other well-placed companies in the steel space include United States Steel Corporation (X - Free Report) , Ternium S.A. (TX - Free Report) and Angang Steel Company Limited , all sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
U.S. Steel has an expected long-term growth of 8%.
Ternium has an expected long-term growth of roughly 18.4%.
Angang Steel has an expected earnings growth rate of 45.3% for the current year.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere
1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging
phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>