Nucor Corporation (NUE - Free Report) is purchasing Corporacion POK, S.A. de C.V., a Mexico-based fully-integrated precision castings company. POK manufactures complex castings and precision machined products that are used in the oil and gas, mining as well as sugar processing industries.
POK makes a vast range of precision castings using steel, bronze, iron and specialty exotic alloys and currently employs 425 people at its Guadalajara, Mexico production facility.
According to Nucor, the buyout supports its strategy in Mexico, which is focused on downstream processing for value-added, high-quality applications targeting niche markets. Expansion of capability for producing value-added products is a major component of the company’s strategy for long-term profitable growth.
POK will complement Nucor's acquisition of a cold finish facility in Monterrey in 2017. The acquisition will enable the company to extend current product offerings. It will also provide the opportunity to boost sales in existing and new markets.
Nucor's existing Mexican operations include several sheet steel processing facilities that are part of the Steel Technologies joint venture (JV) with Mitsui & Co. and a steel sales office along with the Nucor ATP Mexico cold finish facility in Monterrey. Moreover, Nucor is constructing a galvanizing line with its JV partner, JFE Steel Corporation, to serve the Mexican automotive market.
Shares of Nucor have lost 6.4% in the past six months compared with the industry’s 22.9% decline.
In October, Nucor stated that it expects a decline in fourth-quarter earnings in all the three operating segments from the third-quarter’s tally, barring the impairment charge. Per the company, the anticipated downside is likely to be caused by typical seasonality factors.
Nevertheless, the company projects strong performance in the fourth quarter and expects earnings to improve significantly on a year-over-year basis. Moreover, it expects to sustain strength in the steel end use markets.
Zacks Rank & Stocks to Consider
Nucor currently carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the basic materials space include CF Industries Holdings, Inc. (CF - Free Report) , Methanex Corporation (MEOH - Free Report) and The Mosaic Company (MOS - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CF Industries has an expected long-term earnings growth rate of 6%. The company’s shares have gained 15.8% in the past year.
Methanex has an expected long-term earnings growth rate of 15%. Its shares have moved up 2.8% in a year’s time.
Mosaic has an expected long-term earnings growth rate of 7%. The company’s shares have surged 49% in the past year.
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