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Nucor (NUE) Poised on Acquisitions, Strategic Investments
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On May 16, we issued an updated research report on steel giant, Nucor Corporation (NUE - Free Report) .
Nucor’s profits surged year over year in first-quarter 2017 on higher sales. However, its earnings fell short of the Zacks Consensus Estimate. Revenues rose by double digits and topped expectations. The company expects earnings to rise sequentially in the second quarter.
Nucor’s shares have lost 9.6% over the past three months, outperforming a 15.4% decline for the Zacks categorized Steel-Producers industry.
Nucor has been focusing on growth through strategic acquisitions and it is well positioned to gain from such efforts to expand business through mergers and acquisitions. The acquisition of Gallatin Steel helped the company to improve foothold in the Midwest.
Moreover, the acquisition of Chicago-based Independence Tube Corporation allowed the company to expand product portfolio in terms of fabricator and service center customers and gain foothold in non-residential construction market. The purchase of the assets of steel electrical conduit maker, Republic Conduit is also expected to make the Nucor a market leader in steel electrical conduits. Moreover, the purchase of Southland Tube also strengthened Nucor’s foothold in the hollow structural section (“HSS”) steel tubing market.
The recent purchase of the assets of open web steel joists maker, Omega Joist also allows Nucor to grow its joist and decking business in Canada. It also complements the Vulcraft plant that the company is currently building in Ancaster, Ontario.
Nucor also remains committed to expand its production capabilities. The company, in Mar 2017, announced plans to upgrade a rolling mill at Nucor Steel Marion, Inc. by investing $85 million. With the upgrade, Nucor Steel Marion will be able to maintain a cost competitive position by reducing operating costs. This would enable it to serve the customers better. Further, it will enhance Nucor Steel Marion’s ability to produce the most efficient and highest-quality recycled steel available in the market.
The company is also investing an estimated $230 million to add an additional cold mill at its Nucor Steel Arkansas division. The additional cold mill (start-up expected in 2018) will give Nucor the capability to make products that it currently does not produce.
Moreover, sheet piling production capabilities expanded at Nucor-Yamato structural steel following the completion of a roughly $115 million expansion project. The Nucor-Yamato joint venture is expected to continue to grow its share in the steel pilings market over the next few years. The joint venture remains focused on broadening its value-added offerings.
Nucor is also seeing continued momentum in the automotive market. The company remains focused on achieving greater penetration of this major market. The company 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.
However, the steel industry is still not out of the woods yet. The industry is still under relentless pressure caused by years of excess steel-making capacity. Moreover, the U.S. steel industry remains under the risk of cheaper imports despite some favorable developments on steel trade cases in the recent past.
Unfairly-traded, subsidized imports are still flowing into the American market due to foreign producers' overcapacity. According to the American Iron and Steel Institute (“AISI”), total and finished steel imports increased 18.7% and 7.8% year over year, respectively, during the first quarter of 2017.
Better-placed companies in the steel space include ArcelorMittal (MT - Free Report) , Ternium S.A. (TX - Free Report) and Schnitzer Steel Industries, Inc. .
Ternium, also a Zacks Rank #1 stock, has expected long-term growth of 18.4%.
Schnitzer Steel, which carries a Zacks Rank #2 (Buy), has delivered an average positive earnings surprise of 73.3% over the trailing four quarters.
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Image: Bigstock
Nucor (NUE) Poised on Acquisitions, Strategic Investments
On May 16, we issued an updated research report on steel giant, Nucor Corporation (NUE - Free Report) .
Nucor’s profits surged year over year in first-quarter 2017 on higher sales. However, its earnings fell short of the Zacks Consensus Estimate. Revenues rose by double digits and topped expectations. The company expects earnings to rise sequentially in the second quarter.
Nucor’s shares have lost 9.6% over the past three months, outperforming a 15.4% decline for the Zacks categorized Steel-Producers industry.
Nucor has been focusing on growth through strategic acquisitions and it is well positioned to gain from such efforts to expand business through mergers and acquisitions. The acquisition of Gallatin Steel helped the company to improve foothold in the Midwest.
Moreover, the acquisition of Chicago-based Independence Tube Corporation allowed the company to expand product portfolio in terms of fabricator and service center customers and gain foothold in non-residential construction market. The purchase of the assets of steel electrical conduit maker, Republic Conduit is also expected to make the Nucor a market leader in steel electrical conduits. Moreover, the purchase of Southland Tube also strengthened Nucor’s foothold in the hollow structural section (“HSS”) steel tubing market.
The recent purchase of the assets of open web steel joists maker, Omega Joist also allows Nucor to grow its joist and decking business in Canada. It also complements the Vulcraft plant that the company is currently building in Ancaster, Ontario.
Nucor also remains committed to expand its production capabilities. The company, in Mar 2017, announced plans to upgrade a rolling mill at Nucor Steel Marion, Inc. by investing $85 million. With the upgrade, Nucor Steel Marion will be able to maintain a cost competitive position by reducing operating costs. This would enable it to serve the customers better. Further, it will enhance Nucor Steel Marion’s ability to produce the most efficient and highest-quality recycled steel available in the market.
The company is also investing an estimated $230 million to add an additional cold mill at its Nucor Steel Arkansas division. The additional cold mill (start-up expected in 2018) will give Nucor the capability to make products that it currently does not produce.
Moreover, sheet piling production capabilities expanded at Nucor-Yamato structural steel following the completion of a roughly $115 million expansion project. The Nucor-Yamato joint venture is expected to continue to grow its share in the steel pilings market over the next few years. The joint venture remains focused on broadening its value-added offerings.
Nucor is also seeing continued momentum in the automotive market. The company remains focused on achieving greater penetration of this major market. The company 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.
However, the steel industry is still not out of the woods yet. The industry is still under relentless pressure caused by years of excess steel-making capacity. Moreover, the U.S. steel industry remains under the risk of cheaper imports despite some favorable developments on steel trade cases in the recent past.
Unfairly-traded, subsidized imports are still flowing into the American market due to foreign producers' overcapacity. According to the American Iron and Steel Institute (“AISI”), total and finished steel imports increased 18.7% and 7.8% year over year, respectively, during the first quarter of 2017.
Nucor Corporation Price and Consensus
Nucor Corporation Price and Consensus | Nucor Corporation Quote
Zacks Rank & Key Picks
Nucor is a Zacks Rank #3 (Hold) stock.
Better-placed companies in the steel space include ArcelorMittal (MT - Free Report) , Ternium S.A. (TX - Free Report) and Schnitzer Steel Industries, Inc. .
ArcelorMittal sports a Zacks Rank #1 (Strong Buy) and has expected long-term growth of 11.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ternium, also a Zacks Rank #1 stock, has expected long-term growth of 18.4%.
Schnitzer Steel, which carries a Zacks Rank #2 (Buy), has delivered an average positive earnings surprise of 73.3% over the trailing four quarters.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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