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Nucor (NUE) Gains on Strong Demand, Higher Steel Prices

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We issued an updated research report on Nucor Corporation (NUE - Free Report) on May 26.

Nucor, which is among the prominent players in the steel space along with United States Steel Corporation (X - Free Report) , Steel Dynamics, Inc. (STLD - Free Report) and ArcelorMittal (MT - Free Report) , is benefiting from strength in the non-residential construction market and a strong recovery in the automotive market.

Strong customer demand has led to a rebound in the automotive market. The company is also seeing improved conditions in heavy equipment, agriculture and renewable energy markets. Higher demand is supporting its shipments.  Nucor should also gain from considerable market opportunities from its strategic investments in its most significant growth projects.

Nucor is also benefiting from a rally in steel prices. Higher average selling prices drove its sales and bottom line in the first quarter. Its average sales price climbed 25% year over year in the quarter.

Nucor, in its first-quarter call, said that it expects second-quarter earnings to be the highest quarterly earnings in its history, exceeding the record-level set in the first quarter. Earnings are expected to be mainly driven by higher pricing and margins in the steel mills segment.
 
Notably, U.S. steel prices have staged a strong recovery and hit record levels after plunging to pandemic-led multi-year lows in August 2020. The rebound has been driven by rising demand (especially in automotive and construction), supply shortages and higher raw material costs.

The benchmark hot-rolled coil (HRC) prices started to recover in September 2020 on U.S. steel mills’ back-to-back price hike actions, tight supply and surging end-market demand, especially in automotive. Prices are shooting higher since then and surged to levels not seen in more than a decade. As such, higher domestic steel prices should act as a catalyst for Nucor’s steel mills unit.

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