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Nucor (NUE) Up 2.1% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Nucor (NUE - Free Report) . Shares have added about 2.1% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Nucor due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Nucor Surpasses Q3 Earnings, Lags Revenue Estimates

Nucor reported lower profits in third-quarter 2019. The company logged net earnings of $275 million or 90 cents per share, down from $676.7 million or $2.13 in the year-ago quarter. Nevertheless, earnings beat the Zacks Consensus Estimate of 80 cents.

Nucor recorded net sales of $5,464.5 million, down roughly 19% year over year. The figure missed the Zacks Consensus Estimate of $5,595 million.

Operating Figures

Total steel mills shipments in the quarter were 5,788,000 tons, down 8% year over year. Total tons shipped to outside customers fell 7% year over year to 6,555,000 tons. Average sales price declined 13% year over year.

Steel mill operating rates fell to 83% from 92% in the year-ago quarter.

Segment Highlights

Profitability in the steel mills segment fell sequentially in the third quarter. Per the company, plate and sheet market conditions weakened in the quarter. Also, excess inventory throughout the supply chain led to continued destocking by customers.

The performance of steel products unit improved sequentially in the reported quarter, courtesy of strong non-residential construction market conditions.

Performance in the raw materials division declined sequentially in the third quarter due to margin compression in Nucor’s DRI businesses. Moreover, the company’s Louisiana-based DRI facility started a planned outage that is likely to last till mid-November.

Financial Position

Nucor ended the third quarter with cash and cash equivalents of around $1.69 billion, down 12.7% year over year. Long-term debt was $4,287.6 million, up 1.3% year over year.

The company generated $2.12 billion cash from operating activities for the nine months, up 11.5% year over year.

Outlook

Nucor expects earnings to decline sequentially in the fourth quarter.

Profitability in the steel mills unit is likely to decline in the fourth quarter compared with third-quarter levels. The company expects lower steel prices at the end of the third quarter to impact its fourth quarter performance. However, the company believes that steel prices have bottomed out.  

Earnings of steel products unit is expected to decline slightly in the fourth quarter compared with third-quarter levels due to normal year-end seasonality.

The company expects profitability of the raw materials unit to decline sequentially in the fourth quarter due to the impact of its DRI facility's planned outage mentioned earlier along with further expected margin pressure.


 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

Currently, Nucor has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Nucor has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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