Nucor Corporation (NUE - Free Report) has agreed to buy St. Louis-based steel bar maker, St. Louis Cold Drawn, Inc. for an undisclosed price. St. Louis Cold Drawn, which employs 125 people, makes cold drawn rounds, hexagons, squares and special sections that primarily caters the U.S. and Mexican automotive and industrial markets.
St. Louis Cold Drawn has two manufacturing locations in St. Louis, MO, and Monterrey, Mexico, that have a total annual capacity of 200,000 tons. The addition of these facilities will expand the total annually capacity of Nucor's cold finished bar and wire facilities to over 1.1 million tons. It will also help the steel maker advance its objective of growing its sales to automotive customers.
The buyout is in sync with Nucor's strategy to expand its position as the market leader in cold finished bar products and complements its goal to profitably grow its value-added product portfolio. Moreover, the acquisition creates synergies with Nucor's bar mills by offering an additional channel to market for its special bar quality products.
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.
Nucor, in early 2017, wrapped up its purchase of steel electrical conduit maker, Republic Conduit, from Luxembourg-based Tenaris S.A. for $335 million. The acquisition is expected to make the Nucor a market leader in steel electrical conduits. Moreover, the company acquired Southland Tube for $130 million in Jan 2017. The buyout strengthens Nucor’s foothold in the hollow structural section (“HSS”) steel tubing maker. Moreover, the purchase of the assets of open web steel joists maker, Omega Joist also allows Nucor to grow its joist and decking business in Canada.
Nucor’s shares gained 11.6% over the past year, underperforming the 30.6% gain of the industry it belongs to.
Nucor missed both revenue and earnings expectations in second-quarter 2017. Its earnings of $1.00 per share for the quarter trailed the Zacks Consensus Estimate of $1.07. Revenues climbed around 22% year over year to $5,174.8 million in the quarter, also falling short of the Zacks Consensus Estimate of $5,307.8 million.
Nucor sees earnings in third-quarter 2017 to be in a band similar to the quarterly results of first-half 2017. The company continues to achieve greater penetration of the automotive market and expects to continue this trend for the remaining year. Nucor is also upbeat about improving prospects in the energy markets.
Nucor currently holds a Zacks Rank #3 (Hold).
Other Stocks to Consider
Some better-ranked stocks in the basic materials space are POSCO (PKX - Free Report) , The Chemours Company (CC - Free Report) and Kronos Worldwide Inc (KRO - Free Report) . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
POSCO has expected long-term earnings growth rate of 5%.
Chemours has expected long-term earnings growth rate of 15.5%.
Kronos Worldwide has expected long-term earnings growth rate of 5%.
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