Goldman: Nucor Sell-Off Overdone, Buy the Dips

Goldman Sachs notes Nucor's (NUE) stock price fell over 10% as it reported earnings that were ahead of expectations for 2Q but offered guidance that fell short of consensus expectations for 3Q. GSCO hase modestly lowered their 3Q and 4Q2008 EPS estimates to $1.95 and $1.90, from $2.17 and $1.92, respectively, mostly to reflect higher scrap costs and additional LIFO charges. Their new 2008 estimate comes down to $7.20 from $7.40, but they left unchanged 2009, 2010 and normalized estimates of $8.70, $9.85 and $8.85, respectively, which reflect volume growth and margin enhancement from valued added products.

GSCO thinks investors are over-reacting to fear of a weaker US economy and a potential global slowdown. Steel markets globally are in deficit, and there continues to be strong demand trends in BRIC and other developing nations that are straining global supply and more than offsetting demand weakness in US markets. And the weak US dollar is allowing increasing export growth for steelmakers at higher prices and margins. They see the steel cycle as very sustainable and look for continued strong earnings.

Following the correction, which they see as unwarranted, NUE sells at a P/E of 8.3X 2008 estimate (a 7.7% discount to a peer group that has also corrected sharply). Reiterates Buy and $98 target.

Notablecalls: Think we'll see a nice bounce in NUE in the next couple of days. With oil getting somewhat cheaper and NUE being a user of it, things continue to look OK for NUE.

Comments

[investor88:]

Goldman's research throws strong light on why Nucor [NUE] should be us$98 by year end. I tend to agree as NUE has good fundamentals as explained by Goldman's research.

2008 Jul 18 09:51 AM

[Think-About-It:]

NUE just lowered next quarter's guidance and nobody saw it coming. Don't buy now unless you just want to pick up a small, say 1/4th, portion of your intended investment. In this volatile market wait for the other shoe to drop.

I've liked NUE since 1987 and would rather not buy at this level. Demand may moderate. CChina may take a breather... then pounce.

2008 Jul 18 01:21 PM

[The pessimi...:]

I started my position today in NUE and will continue to add until year's end.. from theer we will see what happens. Dan (CEO of NUE) was on Mad Money last night and even with the market correction he was totally positive about the BRIC emerging markets..if you want to still call them emerging, ..particularly China and their quest to import all of NUE's product. That is just China!
I remain bullish on NUE.. they should not be down this far olr a better way to look at it , this cheap.. get some!

2008 Jul 19 02:08 AM

[helplessobs...:]

GSCO know the investment business, GO NUE.

2008 Aug 15 04:07 PM

[User 264791:]

nue just uped its guidence in sept.,for Q3.You were right at the time.Now its a strong buy,at these sept.prices.They report in Oct.& will knock it out of the park.Now is the time,below 50.00.My conservative target is 63.00,to scale out.
9/24/08 CAPGAIN88

On Jul 18 01:21 PM Think-About- It wrote:

> NUE just lowered next quarter's guidance and nobody saw it coming.
> Don't buy now unless you just want to pick up a small, say 1/4th,
> portion of your intended investment. In this volatile market wait
> for the other shoe to drop.
>
> I've liked NUE since 1987 and would rather not buy at this level.
> Demand may moderate. CChina may take a breather... then pounce.
>

2008 Sep 24 10:55 PM