Nucor's Profit Takes a Huge Leap

Apr.22.11 | About: Nucor Corporation (NUE)

Nucor Corporation (NYSE:NUE) reported a stupendous increase in profit to $190.8 million or 56 cents per share (excluding special items) in the first quarter of 2011 from $55 million or 15 cents per share (excluding special items) in the same quarter of 2010. With this, the company has beaten the Zacks Consensus Estimate by 21 cents per share and its own guidance of 30 cents–35 cents per share.

Consolidated sales surged 32% to $4.83 billion due to a 22% increase in average price per ton and a 9% rise in shipments (to 6.0 million tons) to outside customers . It was higher than the Zacks Consensus Estimate of $4.43 billion.

Steel mill shipments grew 10% to 5.2 million tons during the quarter. The average scrap and scrap substitute cost per ton gained 33% to $424.

Overall operating rates at steel mills increased to approximately 80% in the quarter compared with 73% in the first quarter of 2010. Due to this increased utilization, total energy costs decreased approximately $1 per ton from the first quarter of 2010.

Nucor’s liquidity position remained strong at the end of the quarter. The company had cash and cash equivalents and short-term investments of $2.30 billion as of April 2, 2011. It has an untapped $1.3 billion revolving credit facility that matures in November 2012. The company’s long-term debt remained unchanged at $4.28 billion as of the above date.

In the quarter, Nucor had cash flow of $47.5 million from operations compared with an outflow of $3.0 million in the same quarter of prior year. The improvement in cash flow was attributable to higher profit. Meanwhile, capital expenditure increased to $96.0 million from $54.2 million a year ago.

Nucor expects results in the second quarter to improve over the first quarter, despite some market weakness that may impact results at the end of the second quarter. Further, the company continues to see slow but steady improvement in real demand in certain end markets.

The most challenging markets for its products are associated with residential and non-residential construction. The company retains a Zacks #2 Rank on its stock, which translates to short term rating of “Buy” in the short term.