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Nucor (NUE) Rallies 92% in 6 Months: What's Driving the Stock?

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Nucor Corporation’s (NUE - Free Report) shares have surged 91.9% over the past six months. The company has also outperformed its industry’s rise of 42.3% over the same time frame. Moreover, it has topped the S&P 500’s 18% rise over the same period.

Let’s take a look into the factors that are driving this Zacks Rank #1 (Strong Buy) stock.

Zacks Investment Research
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What’s Aiding NUE?

Nucor delivered higher profits in the second quarter of 2021, thanks to strong demand and higher steel prices. Its earnings of $5.04 per share topped the Zacks Consensus Estimate of $4.81. The second quarter marked the highest quarterly earnings in the steel giant’s history.

The company is benefiting from strength in the non-residential construction market and a recovery in the automotive market. Strong customer demand has led to a rebound in the automotive market. The company is also seeing strength in heavy and agriculture equipment and improve conditions in energy markets. Higher demand is supporting its shipments.

Nucor is also benefiting from an upswing in steel prices. Higher average selling prices boosted its revenues and bottom line in the second quarter. Its average sales price climbed 49% year over year in the quarter.
 
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), tight supply conditions and higher raw material costs.

The benchmark hot-rolled coil (“HRC”) prices have shot up more than four-fold from the lows witnessed in August 2020. As such, higher domestic steel prices should act as a catalyst for Nucor’s steel mills unit.

Nucor, on its second-quarter call, said that it expects third-quarter earnings to be the highest quarterly earnings in its history, exceeding the record-level set in the second quarter. Earnings are expected to be mainly driven by higher pricing and margins in the steel mills segment.

Earnings estimates for Nucor have also been going up over the past two months. The Zacks Consensus Estimate for 2021 has increased around 34.9% while the same for third-quarter 2021 has gone up 76.2%. The favorable estimate revisions instill investor confidence in the stock.

Other Stocks to Consider

Some other top-ranked stocks worth considering in the basic materials space include ArcelorMittal (MT - Free Report) , Olympic Steel, Inc. (ZEUS - Free Report) and Schnitzer Steel Industries, Inc. (SCHN - Free Report) , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

ArcelorMittal has an expected earnings growth rate of 1,731.2% for the current year. The company’s shares have shot up around 163% in the past year.

Olympic Steel has a projected earnings growth rate of 2,362.2% for the current year. The company’s shares have surged around 146% in a year.

Schnitzer Steel has an expected earnings growth rate of 1,253.5% for the current fiscal year. The stock has also surged around 132% over a year.