Nucor Corp. (NYSE: NUE) delivered strong third-quarter earnings on October 28. NUE stock was up nearly 5.5% in the final hour of trading after the company posted a beat on the top and bottom lines. Even with the company guiding for lower revenue and earnings in the current quarter, investors liked what they heard.
Table of Contents
Revenue of $8.52 billion beat estimates for $8.15 billion by approximately 4.5%. However, it was the earnings beat that had investors fired up. Nucor delivered adjusted earnings per share (EPS) of $2.63, which was 21.7% higher than estimates of $2.17. It was also well above the lowered guidance the company issued in September, which sent the stock plunging.
The earnings report was evidence that Nucor’s steps in prior quarters are paying off. Disciplined capital investment has allowed the steel giant to expand capacity in engineered steel and downstream fabrication. At the same time, the company’s vertically integrated model and commitment to sustainable production give it price flexibility and margin protection that keep it ahead of the competition.
Nucor is a Bellwether for Infrastructure and Manufacturing
Nucor’s quarterly earnings report shows why being the largest and most diversified U.S. steelmaker has its advantages. Nucor is the leading provider of steel solutions for data center construction. It offers a comprehensive suite of products that are well-suited for data center applications.
In the company’s earnings presentation, it cited data from the Dodge Construction Network which forecasts approximately 60 million square feet of data center construction will be needed in 2025. That’s a 30% year-over-year increase.
For NUE stock investors, the takeaway is that 3,500 tons of steel are required for every 250,000 square feet of data center construction. This puts a solid source of revenue for Nucor in future quarters.
But data centers aren’t the only growth driver. Nucor stands to benefit directly from a multiyear surge in demand tied to EV and battery manufacturing, and large-scale infrastructure builds. The company’s mix of flat-rolled, bar, and steel products positions it at the heart of both industrial and public construction growth.
Did Nucor Just Perform a Picture-Perfect Head Fake?
In September, NUE stock dropped sharply after Nucor guided to third-quarter earnings between $2.05 and $2.15 per share. That would have been significantly lower than analysts’ expectations at the time of $2.46. Those estimates drifted lower to $2.13 by the time Carrier reported.
Nucor then smashed those estimates with a $2.63 number that was above the prior consensus target. That means today’s 5.49% gain is getting the stock back to where it was.
But was this a case of setting the bar low? When issuing the revised guidance, Nucor said it still faced headwinds from declining steel prices.
In the company’s earnings presentation, it noted that realized prices for sheet steel had dipped slightly from $1,008 per ton in the prior quarter to $982 per ton in the current quarter, a drop of about 2.5%. The company noted a smaller percentage decline in other flat and long products.
Nucor described this as “stable realized pricing” in the quarter, compared to the prior quarter. It also noted that it experienced margin pressure due to higher average costs per ton and slightly lower volumes. The lower realized prices were also partially offset by a drop in average scrap costs from $360 to $349 per ton.
However, when it comes to an earnings report, it’s always the future guidance that matters most. Once again, Nucor is guiding for “lower realized pricing at sheet mills” in the current quarter. That, along with fewer shipping days, means that investors should expect more price softening, albeit of a modest nature.
Investing In Its Future
Nucor reinvested $807 million in the quarter and raised its full-year capital expenditures guidance to $3.3 billion. The company expects four major projects to be completed by the end of the year and remarked that its new Kingman and Lexington facilities should be EBITDA-positive by the first quarter of 2026. It added that the West Virginia steel mill is now 75% built.
NUE Stock: Cautious Optimism, But Don’t Chase
Analysts believe that earnings will increase by 43.8% in the next 12 months. Even with Nucor company guiding for slightly lower earnings in the current quarter, the earnings growth, combined with a forward price-to-earnings (P/E) ratio of around 18x earnings, gives NUE stock an attractive valuation.
However, as noted above, the stock’s strong post-earnings bounce has just taken it back to where it was before the company lowered the bar. The question is whether Nucor provided enough reason for investors to chase the stock higher.
It would be prudent to wait to hear from the analysts. One encouraging sign is that Morgan Stanley raised its price target from $152 to $165 after the earnings call. That aligns with an earlier price target boost from JPMorgan Chase, which raised its target from $165 to $172.
That still may not leave enough meat on the bone for growth investors. However, value investors can benefit from the company’s dividend. The yield is only 1.45%, but the annual payout is $2.20 per share for this dividend king, which has increased its dividend for 52 consecutive years.
Leave a Reply