Nucor's Record Quarter Translates into Strong Growth

Nucor (NUE) recently reported record second-quarter earnings of $1.94 per share, beating the consensus estimate by nearly 8% and topping the year-prior $1.14. Consolidated net sales of $7.09 billion also reached a record level, exceeding last year’s $4.17 billion. For income, the company is yielding 2.3%, which well ahead of the industry average.

Company Description

Nucor and its affiliates, which make the most steel in America, manufacture steel products. The company’s operating facilities are primarily in the U.S. and Canada. Nucor also brokers ferrous and nonferrous metals, pig iron and HBI/DRI; supplies ferro-alloys; and processes ferrous and nonferrous scrap. The company is also North America's largest recycler.

A Record Quarter Translates into Solid Growth

The steel maker recently announced record results in the second quarter. Earnings of $1.94 per share, beat the consensus estimate by nearly 8% and topped the year-prior $1.14. Consolidated net sales of $7.09 billion also reached a record level, exceeding last year’s $4.17 billion.

The company said it expects a strong third quarter, with earnings ranging from $1.80 to $1.85 per share. Nucor added that it expects continued strength in its sheet, plate, beam and bar businesses due to the solid global demand for steel. The company does expect its downstream businesses to be challenged by rising steel prices, but noted that it still expects continued good results from this segment.

While NUE’s quarterly results reflect strong growth, the aforementioned earnings guidance is below Wall Street expectations and caused a share price set back. However, fundamentals still look positive for the long-term as evidenced by the bullish Street projections for the full year.

More specifically, for the full year, forecasts of $7.16 per share advanced from last week’s $7.10 and last month’s $6.95. Third-quarter analyst estimates of $1.91 per share are a bit off last month’s $1.93 but above the two months-ago level of $1.88.

Other Signs of Growth

The company offers a return on equity [ROE] of 30%, eclipsing the industry average of 20%. Its net margin of 8.4% is higher than the industry average of 7.1%.

Rewarding Income

In addition to growth, Nucor boasts a hefty dividend yield in comparison to its industry group. The company’s yield of 2.3% is a rewarding one among its peers as most companies within its industry pay no dividend.

The company noted in its second-quarter report that, in June, it declared a supplemental dividend of 20 cents per share in addition to the 32 cents base dividend. The total dividend of 52 cents per share is payable on August 11, 2008 to stockholders of record on June 30, 2008. Nucor stated that it began paying a supplemental dividend in the second quarter of 2005, allowing stockholders to participate in its successful pay-for-performance business model.

Comments

[Shawn in Te...:]

I work for one of Nucor's downstream businesses. If you're on the outside looking in I hope you see what all of us from the inside looking out see, a strong company with steady growth and a business plan that works. I can't help but to brag about how well Dan DiMicco euns this company and what a strong advocate he has been for not only our company but the steel industry and U.S. manufacturing sector too. We have made a difference and we will make more differences in the future. I bet on Nucor and believe strongly in our company.

2008 Jul 29 11:14 AM

[Urbane Gori...:]

Yahoo finance shows a ROE of 16%... I'm presuming that the number you quoted is based on the just released report and that Yahoo is just behind on their updates... Having said that, their other numbers on Yahoo look real good.

Just a note... It would seem that the companies poised to do better in the future are those like MTL and X that have their own coal franchises. (Not to mention Cleveland Cliff's present attempt to do so.. )

Anyway, price is down, stochastics weekly and daily look good... I'll probably buy some when the hourly stoch drops again... Thanks for the heads up!

jegan ;-)

2008 Jul 29 01:55 PM

[einstein p ...:]

NUE at 55 is a steal ---- no pun intended. This stock is way to cheap at these levels. Excellent management, consistent growth, consolidation within the space, and a good dividend.

2008 Aug 01 11:59 AM

[Old Wizard:]

I've owned this stock since the mid-60's. It has done what no other steel stock and practically no other stock period has done. Not only has its financial performance been excellent, but its labor policies have been nothing short of enlightened. I wish all of our US corporations would use their model. Their mode of operation shows that a visionary management and a highly productive work force is not only possible in an American company but also highly competitive on the world stage despite foreign gov. questionable trade policies[and has remained so for decades].

2008 Aug 01 05:51 PM

[Dinger888:]

Good article. Yes, I agree. NUE is a solid company and it is sitting at solid support near 50. I am confident this will make for a nice long-term position.

Trade Well.
Dinger

2008 Sep 01 07:54 PM