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X vs. NUE: Which Is the Better Steel Stock Ahead of Earnings?
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The steel industry is gaining strength on the back of a cyclical upturn in steel demand and a resurgent global economy. Steel makers are also benefiting from a recovery in steel prices. In particular, steel prices are on an upswing in the United States on the back of the Trump administration’s trade actions to curb imports, reflected by the recent sharp rise in hot-rolled steel prices.
President Donald Trump’s recent imposition of tariffs on steel imports is a welcome relief to U.S. steel players. The Trump administration, last month, slapped a 25% tariff on steel imports aimed at protecting the U.S. steel industry which had long struggled to cope with a tide of subsidized foreign imports.
The President’s protectionist trade actions should provide further cushion to the American steel industry. The tariffs are expected to lead to lower imports into the United States, which would in turn boost demand for American steel and drive profitability of domestic steel makers.
The hefty tariffs would lead to a spurt in steel prices and give American steel producers more pricing power. Notably, U.S. steel prices are on an uptrend following the trade tariff announcement. Higher steel prices should drive the performance of U.S. steel makers in the first quarter.
The Zacks Steel Producers industry has outperformed the broader market (S&P 500) in a year’s time. The industry has gained around 31.2% in this period, topping the S&P 500’s corresponding return of around 14.8%.
Per the Zacks Industry classification, the steel industry is grouped under the broader Basic Materials sector. The Basic Materials sector is among the Zacks sectors that are expected to rack up the strongest gains in the first quarter. Earnings for the sector are projected to surge 41% in the first quarter while revenues are expected to go up 20.3%, per our latest Earnings Preview.
In this write up, we run a comparative analysis on two major U.S. steel stocks – United States Steel Corp. (X - Free Report) and Nucor Corp. (NUE - Free Report) – to figure out which of these stocks is better placed ahead of their first-quarter earnings report.
Nucor is scheduled to report its first-quarter numbers on Apr 19, while U.S. Steel will post its results on Apr 26. While U.S. Steel sports a Zacks Rank #1 (Strong Buy), Nucor is a Zacks Rank #2 (Buy) stock. You can see the complete list of today’s Zacks #1 Rank stocks here.
Other steel stocks reporting earnings this week and the next include Steel Dynamics, Inc. (STLD - Free Report) , Universal Stainless & Alloy Products, Inc. (USAP - Free Report) and Ternium S.A. (TX - Free Report) .
Let's take a closer look at how U.S. Steel and Nucor are stacked up against each other in terms of certain key metrics.
ESP and Earnings History
Earnings ESP is our proprietary methodology for identifying stocks that have high chances of surprising in their upcoming earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Our research shows that for stocks with the combination of a favorable Zacks Rank #1, 2 or 3 (Hold) and a positive Earnings ESP, the chance of a positive earnings surprise is as high as 70%.
Nucor is likely to beat earnings in the quarter to be reported. This is because the stock has an Earnings ESP of +0.61% and a Zacks Rank #2. However, the picture is different for U.S. Steel with an Earnings ESP of -4.04% and a Zacks Rank #1, a combination which makes surprise prediction difficult.
With respect to surprise, U.S. Steel beat estimates in three of the trailing four quarters while missed once. In this timeframe, it came up with an average negative surprise of 40%. On the other hand, Nucor has beaten the Zacks Consensus Estimate in three of the last four quarters, delivering an average positive surprise of 2.7%.
Growth Expectations
In terms of earnings growth expectations, U.S. Steel scores way above Nucor. The expected earnings per share growth rate for U.S. Steel for the first quarter currently stands at 134.9% compared with an expected decline of 0.9% for Nucor.
Price Performance
U.S. Steel’s shares have rallied 27.9% over the past year while Nucor’s shares have gained 11.3%. While both stocks have underperformed the industry over the same period, U.S. Steel clearly scores above Nucor.
Debt-to-Equity Ratio
The debt-to-equity ratio is a good indicator of the financial well-being of a company and is a good proxy for its debt-servicing capacity. U.S. Steel has a debt-to-equity ratio of 81.3, while the industry has debt-to-equity ratio of 55. In contrast, with a debt-to-equity ratio of 41.8 Nucor wins this round.
Current Ratio
This metric measures the ability of a company to meet its short-term debt obligations efficiently. In other words, it is the ratio of the current level of total assets and versus the current level of liabilities. Here, Nucor is a clear winner with a current ratio of 2.42, which is superior to U.S. Steel’s reading of 1.75.
Valuation
Going by the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) multiple, which is often used to value steel stocks, U.S. Steel looks cheaper compared with Nucor.
In case of Nucor, the trailing 12-months EV/EBITDA ratio is 9.4, which is above its own average of 8.8 in the past one year. Moreover, it is overvalued than the industry that has a reading of 9. On the other hand, U.S. Steel is cheaper with a trailing 12-month EV/EBITDA ratio of 6.9.
Return on Equity (ROE)
ROE is a measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12-months for Nucor and U.S. Steel is 13% and 12.6%, respectively. As such, Nucor holds an edge here.
The Verdict
Nucor scores higher in terms of debt-to-equity ratio, ROE measures and current ratio. On top of that, the company has a better ESP reading vis-à-vis U.S. Steel.
However, U.S. Steel holds an advantage when it comes to price performance, growth expectations and valuation. Overall, our comparative analysis shows that Nucor has an edge over U.S. Steel.
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Image: Bigstock
X vs. NUE: Which Is the Better Steel Stock Ahead of Earnings?
The steel industry is gaining strength on the back of a cyclical upturn in steel demand and a resurgent global economy. Steel makers are also benefiting from a recovery in steel prices. In particular, steel prices are on an upswing in the United States on the back of the Trump administration’s trade actions to curb imports, reflected by the recent sharp rise in hot-rolled steel prices.
President Donald Trump’s recent imposition of tariffs on steel imports is a welcome relief to U.S. steel players. The Trump administration, last month, slapped a 25% tariff on steel imports aimed at protecting the U.S. steel industry which had long struggled to cope with a tide of subsidized foreign imports.
The President’s protectionist trade actions should provide further cushion to the American steel industry. The tariffs are expected to lead to lower imports into the United States, which would in turn boost demand for American steel and drive profitability of domestic steel makers.
The hefty tariffs would lead to a spurt in steel prices and give American steel producers more pricing power. Notably, U.S. steel prices are on an uptrend following the trade tariff announcement. Higher steel prices should drive the performance of U.S. steel makers in the first quarter.
The Zacks Steel Producers industry has outperformed the broader market (S&P 500) in a year’s time. The industry has gained around 31.2% in this period, topping the S&P 500’s corresponding return of around 14.8%.
Per the Zacks Industry classification, the steel industry is grouped under the broader Basic Materials sector. The Basic Materials sector is among the Zacks sectors that are expected to rack up the strongest gains in the first quarter. Earnings for the sector are projected to surge 41% in the first quarter while revenues are expected to go up 20.3%, per our latest Earnings Preview.
In this write up, we run a comparative analysis on two major U.S. steel stocks – United States Steel Corp. (X - Free Report) and Nucor Corp. (NUE - Free Report) – to figure out which of these stocks is better placed ahead of their first-quarter earnings report.
Nucor is scheduled to report its first-quarter numbers on Apr 19, while U.S. Steel will post its results on Apr 26. While U.S. Steel sports a Zacks Rank #1 (Strong Buy), Nucor is a Zacks Rank #2 (Buy) stock. You can see the complete list of today’s Zacks #1 Rank stocks here.
Other steel stocks reporting earnings this week and the next include Steel Dynamics, Inc. (STLD - Free Report) , Universal Stainless & Alloy Products, Inc. (USAP - Free Report) and Ternium S.A. (TX - Free Report) .
Let's take a closer look at how U.S. Steel and Nucor are stacked up against each other in terms of certain key metrics.
ESP and Earnings History
Earnings ESP is our proprietary methodology for identifying stocks that have high chances of surprising in their upcoming earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Our research shows that for stocks with the combination of a favorable Zacks Rank #1, 2 or 3 (Hold) and a positive Earnings ESP, the chance of a positive earnings surprise is as high as 70%.
Nucor is likely to beat earnings in the quarter to be reported. This is because the stock has an Earnings ESP of +0.61% and a Zacks Rank #2. However, the picture is different for U.S. Steel with an Earnings ESP of -4.04% and a Zacks Rank #1, a combination which makes surprise prediction difficult.
With respect to surprise, U.S. Steel beat estimates in three of the trailing four quarters while missed once. In this timeframe, it came up with an average negative surprise of 40%. On the other hand, Nucor has beaten the Zacks Consensus Estimate in three of the last four quarters, delivering an average positive surprise of 2.7%.
Growth Expectations
In terms of earnings growth expectations, U.S. Steel scores way above Nucor. The expected earnings per share growth rate for U.S. Steel for the first quarter currently stands at 134.9% compared with an expected decline of 0.9% for Nucor.
Price Performance
U.S. Steel’s shares have rallied 27.9% over the past year while Nucor’s shares have gained 11.3%. While both stocks have underperformed the industry over the same period, U.S. Steel clearly scores above Nucor.
Debt-to-Equity Ratio
The debt-to-equity ratio is a good indicator of the financial well-being of a company and is a good proxy for its debt-servicing capacity. U.S. Steel has a debt-to-equity ratio of 81.3, while the industry has debt-to-equity ratio of 55. In contrast, with a debt-to-equity ratio of 41.8 Nucor wins this round.
Current Ratio
This metric measures the ability of a company to meet its short-term debt obligations efficiently. In other words, it is the ratio of the current level of total assets and versus the current level of liabilities. Here, Nucor is a clear winner with a current ratio of 2.42, which is superior to U.S. Steel’s reading of 1.75.
Valuation
Going by the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) multiple, which is often used to value steel stocks, U.S. Steel looks cheaper compared with Nucor.
In case of Nucor, the trailing 12-months EV/EBITDA ratio is 9.4, which is above its own average of 8.8 in the past one year. Moreover, it is overvalued than the industry that has a reading of 9. On the other hand, U.S. Steel is cheaper with a trailing 12-month EV/EBITDA ratio of 6.9.
Return on Equity (ROE)
ROE is a measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12-months for Nucor and U.S. Steel is 13% and 12.6%, respectively. As such, Nucor holds an edge here.
The Verdict
Nucor scores higher in terms of debt-to-equity ratio, ROE measures and current ratio. On top of that, the company has a better ESP reading vis-à-vis U.S. Steel.
However, U.S. Steel holds an advantage when it comes to price performance, growth expectations and valuation. Overall, our comparative analysis shows that Nucor has an edge over U.S. Steel.
Can Hackers Put Money INTO Your Portfolio?
Earlier this year, credit bureau Equifax announced a massive data breach affecting 2 out of every 3 Americans. The cybersecurity industry is expanding quickly in response to this and similar events. But some stocks are better investments than others.
Zacks has just released Cybersecurity! An Investor’s Guide to help Zacks.com readers make the most of the $170 billion per year investment opportunity created by hackers and other threats. It reveals 4 stocks worth looking into right away.
Download the new report now>>