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Nucor's (NUE) Shares Pop 105% YTD: What's Driving the Rally?

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Nucor Corporation’s (NUE - Free Report) shares have surged 105.3% year to date. The steel giant has also outperformed its industry’s rise of 49.1% over the same time frame. Moreover, it has topped the S&P 500’s 18.7% rise over the same period.

Let’s dive into the factors behind this Zacks Rank #1 (Strong Buy) stock’s price appreciation.


Zacks Investment Research
Image Source: Zacks Investment Research


What’s Driving NUE?

Nucor is benefiting from demand strength across major end-use markets and a rally in domestic steel prices. Forecast-topping earnings performance in the first two quarters of 2021 and upbeat prospects have also contributed to the run-up in the company’s shares.

The company, 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 23.7% while the same for third-quarter 2021 has gone up 44.2%. The favorable estimate revisions instill investor confidence in the stock.

The Zacks Consensus Estimate for earnings for 2021 is currently pegged at $19.33, reflecting an expected year-over-year growth of 478.7%. Moreover, earnings are expected to register a 934.9% growth in third-quarter 2021.

Nucor 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.

The company is also gaining 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 Corporation Price and Consensus


Nucor Corporation Price and Consensus

Nucor Corporation price-consensus-chart | Nucor Corporation Quote


Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include United States Steel Corporation (X - Free Report) , Olympic Steel, Inc. (ZEUS - Free Report) and Ternium S.A. (TX - Free Report) , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

U.S. Steel has a projected earnings growth rate of 360.6% for the current year. The company’s shares have shot up around 238% in a year.

Olympic Steel has an expected earnings growth rate of 2,362.2% for the current year. The company’s shares have rallied around 121% in the past year.

Ternium has an expected earnings growth rate of 460.6% for the current fiscal year. The stock has also surged around 178% over a year.

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