New Headwinds For Nucor, But Still Some Value
Stephen Simpson, CFA
Stephen Simpson, CFA
Share, Prices, And Costs Seem To Be Working In Nucor's Long-Term Favor
Stephen Simpson, CFA
Stephen Simpson, CFA
Tue, May 17, 5:43 PM
- May has been rough for stocks of steel companies, but Cowen analysts say investors should be cautious before buying the dip.
- The firm thinks the spike in prices for Chinese hot rolled coil and iron ore will not last long, and that ongoing efforts to contain the HRC dumping experienced since 2014 may have little impact in the U.S. should the Chinese ship products to another country, which then in turn displaces product to the U.S., resulting in increased supply driving prices lower.
- The firm rates U.S. Steel (NYSE:X), AK Steel (NYSE:AKS), Nucor (NYSE:NUE) and ArcelorMittal (NYSE:MT) at Market Perform, with Steel Dynamics (NASDAQ:STLD) and Reliance Steel (NYSE:RS) at Outperform.
- Separately, the U.S. today set final anti-dumping duties of 265.79% on imports of cold-rolled flat steel from China and 71.35% on imports from Japan.
Thu, May 12, 5:17 PM
- U.S. Steel (NYSE:X) tumbled 10.4% and AK Steel (NYSE:AKS) sank 5.4% in today's trade as analysts say more attractive prices for U.S. steel and falling Chinese prices likely will raise the appeal of targeting the U.S. market even after import tariffs were introduced in recent months for some products.
- "A boat load of imports are likely on the way,” says Axiom Capital's Gordon Johnson as he reiterates a Sell rating $5 year-end stock price target for U.S. Steel.
- U.S. Steel has jumped 85% YTD for its best year in more than a decade, but investors now are spooked by fears that steel prices will follow falling prices for raw materials such as iron ore, says BMO Capital analyst David Gagliano.
- Also today: MT -4%, NUE -0.3%, RS -0.3%, STLD -1.4%, TX -0.4%, WOR -0.5%, GGB -4.3%, CLF -6.9%.
Mon, May 2, 7:58 AM
- April monthly performance was: +0.8%
- $0.21 in dividends were paid in April
- Top 10 Holdings as of 3/31/2016: Nucor Corp (NUE): 2.38%, Emerson Electric Co (EMR): 2.24%, Illinois Tool Works Inc (ITW): 2.22%, W.W. Grainger Inc (GWW): 2.22%, Genuine Parts Co (GPC): 2.22%, Pentair PLC (PNR): 2.19%, Leggett & Platt Inc (LEG): 2.19%, McCormick & Co Inc Non-Voting (MKC): 2.17%, Air Products & Chemicals Inc (APD): 2.15%, Dover Corp (DOV): 2.15%
Fri, Apr. 22, 2:40 PM
- Nucor (NUE +0.7%) is downgraded to Sell from Outperform at CLSA following its Q1 earnings miss, saying the recent rally has gone too far too fast.
- The firm also thinks valuations have started to stretch, as there is limited upside on metal margins as a result of rising scrap costs; NUE historically has traded at an average of 13x-14x two-year forward earnings, which yields a $44 stock price target when applied to its revised 2017 EPS of $3.20.
- CLSA also cuts its rating on Reliance Steel (RS -0.4%) to Underperform from Buy while raising its target price to $75 from $72 on higher gross margins.
- Now read Will Reliance Steel & Aluminum surprise again?
Thu, Apr. 21, 11:38 AM
- Nucor (NUE -1%) shares are lower but have pared earlier steep losses after the steelmaker missed Q1 earnings estimates and said it expects Q2 results to be "significantly improved" Q/Q thanks to recently announced price increases.
- For the quarter, NUE reported a $279M profit on its steel mills, up from $217M in the year-ago, as total steel mill energy costs fell by ~$7/ton due to lower electricity and natural gas unit expenses and higher steel production volumes.
- NUE says Q1 results were hurt by a $27.5M accounting-related charge, while the year-ago quarter included a $16.5M credit.
- Now read Nucor battling overcapacity in the steel industry
Thu, Apr. 21, 9:16 AM
Wed, Apr. 20, 5:30 PM
- ADS, ALK, AZZ, BANC, BBT, BHE, BIIB, BK, BX, CFG, CLS, COL, DAN, DGX, DHI, DHR, DOV, DST, ERIC, FAF, FCS, FITB, GM, GMT, HOMB, IMAX, JAKK, JCI, KCG, KEY, LAD, LAZ, LUV, MAN, MDSO, MDWD, NUE, NVR, NVS, PBCT, PHM, PII, POOL, PPG, PVTB, RS, SHW, SILC, SNA, SON, STC, SWK, SYNT, TCB, TRV, UA, UNP, USG, UTEK, VZ
Tue, Apr. 19, 3:39 PM
- Analysts at both Barclays and BofA Merrill Lynch raise their price targets for some steel industry stocks (SLX +4%), seeing industrial activity picking up for this spring and tight domestic supplies and low imports supporting higher steel prices.
- But the firm still expect pricing to come down over H2 as overseas production ramps back up and domestic scrap flows improve.
- Barclays says US Steel (X +4%) and AK Steel (AKS +4.5%) still look expensive but the stocks should benefit in the near term from the momentum driving hot rolled coil pricing; the firm raises its price targets for X to $15 from $7, AKS to $3 from $2, Steel Dynamics (STLD +1.5%) to $27 from $22, and Nucor (NUE +0.9%) to $52 from $47.
- BofA Merrill raises its stock targets for X to $9 from $1, AKS to $2.50 from $1, STLD to $27 from $24, and NUE to $55 from $50.
- However, BofA also downgrades Reliance Steel (RS -0.2%) to Underperform from Neutral, thinking the stock’s strong move has taken its valuation well above its historical EBITDA averages.
- Now read Reuters: China, major producers fail to reach steel deal
Mon, Apr. 18, 5:38 PM
- China and other major steel-producing countries have failed to reach a deal to tackle global steel overcapacity, as the sides argued over the causes and whether China is keeping loss-making producers afloat, Reuters reports.
- China's assistant commerce minister denied that his country subsidizes steel exporters, saying China had cut 90M metric tons of capacity and had plans to reduce it by another 100M-150M, while critics say it would still have a capacity of ~1B metric tons, far in excess of its needs.
- Relevant tickers: SLX, X, AKS, NUE, STLD, MT
- Now read China to scrap some export subsidies, U.S. Trade Rep says
Thu, Apr. 14, 5:32 PM
- China has agreed to scrap $1B in export subsidies on a range of products from metals to agriculture and textiles, according to the U.S. Trade Representative, but some industry executives are skeptical about the deal's impact.
- Reuters reports one source says the agreement is not comprehensive enough to do much to help the U.S. steel industry, given its focus is only on specialty steel products.
- U.S. Steel (NYSE:X) President/CEO Mario Longhi is cautious about China's move: "China has been saying a lot of things for the past couple of decades... We need to see the proof in actions, not just in verbiage."
- Wall Street mostly ignored the agreement, with stocks in related sectors showing a mixed bag in today's trade: AA +2.3%, AKS +1.3%, NUE +0.4%, STLD +0.3%, X -0.8%, FCX -0.8%.
- Now read AK Steel, U.S. Steel downgraded to Sell at UBS
Tue, Apr. 5, 11:36 AM
- Higher steel prices have set the stage for improved performances by the major players in the steel industry, J.P. Morgan analyst Michael Gambardell says as he maintains Overweight ratings for U.S. Steel (X +3.1%), AK Steel (AKS +2.4%), Nucor (NUE +0.6%) and Steel Dynamics (STLD +0.7%).
- Gambardell hikes his price target for U.S. Steel to $28 from $17, as domestic steel sheet prices should be supported by U.S. supply cuts in the form of reduced imports from positive sheet trade case rulings as well as domestic capacity curtailments.
- In raising his price target on NUE to $55 from $43, Gambardell believes mini-mills such as NUE will continue to enjoy margin expansion, with steel prices increasing faster than scrap prices.
- Now read Credit Suisse, Deutsche Bank disagree on near-term steel outlook
Mon, Apr. 4, 7:23 AM
- March monthly performance was: +6.87%
- 52-week performance vs. the S&P 500 is: +5%
- No dividends were paid in March
- Top 10 Holdings as of 2/29/2016: Nucor Corp (NUE): 2.35%, Illinois Tool Works Inc (ITW): 2.18%, Genuine Parts Co (GPC): 2.17%, Leggett & Platt Inc (LEG): 2.16%, Emerson Electric Co (EMR): 2.16%, Target Corp (TGT): 2.16%, Cincinnati Financial Corp (CINF): 2.15%, W W Grainger Inc (GWW): 2.15%, McCormick & Co Inc Non-Voting (MKC): 2.11%, 3M Co (MMM): 2.11%
Wed, Mar. 23, 6:48 PM
- Credit Suisse and Deutsche Bank take divergent views on the outlook for global steel prices (NYSEARCA:SLX), with the former expecting prices to rise further over the next few months and the latter predicting that the upward trend probably will not continue.
- Credit Suisse analyst Curt Woodworth sees U.S. steel prices likely continuing to rise through the end of Q2, citing growing demand and other factors including reduced Asian production and U.S. trade restrictions, which should keep a lid on U.S. steel imports.
- Woodworth names U.S. Steel (NYSE:X) and Steel Dynamics (NASDAQ:STLD) as his top picks in the group, as they have the highest leverage to flat rolled steel, which should be helped in 2016 by much higher volumes and continued import restrictions; he raises his stock prices targets for X, STLD and AK Steel (NYSE:AKS) to a respective $22, $27 and $3.50 from $19, $25 and $2.
- However, Deutsche Bank's Jorge Berstain believes the YTD rally in commodity prices will not continue, and cuts his 2016 iron ore price outlook by 4% to $44/ton; he downgrades Nucor (NYSE:NUE) and Reliance Steel (NYSE:RS) to Hold from Buy, and maintains Sell ratings on X and AKS.
- Earlier: Deutsche Bank sees commodity rally fizzling; downgrades ABX, HL, PAAS, CDE
Mon, Mar. 21, 9:54 AM
- U.S. Steel (X -3.3%) is downgraded to Underperform from Hold with a $10 price target at Jefferies, which says recent gains have been driven by seasonal restocking and gradual demand recovery, but the firm fears momentum may subside into summer.
- Jefferies says U.S. Steel's recent rally is particularly difficult to justify, with shares now trading at 19.3x 2016 and 8.9x 2017 EV/EBITDA vs. the 5.1x historic average; for leverage to near-term price momentum, the firm prefers AK Steel (AKS +1.6%) and would take profits in X.
- Jefferies also downgrades Reliance Steel (RS -1.2%), Commercial Metals (CMC -4.1%) and Olympic Steel (ZEUS -2.3%) to Hold from Buy; the firm's top picks in the space are Steel Dynamics (STLD +0.5%) and Nucor (NUE -0.6%).
Wed, Mar. 16, 2:19 PM
- The U.S. Commerce Department says it will impose anti-dumping duties on certain hot-rolled steel products from seven countries, according to a preliminary ruling.
- AK Steel (AKS +3.1%), ArcelorMittal (MT +0.8%), Nucor (NUE -0.6%), U.S. Steel (X +1.7%), Steel Dynamics (STLD +1.3%) and SSAB Enterprises complained last August that the imported steel goods were being sold too cheaply or benefited from unfair government subsidies.
- The countries affected by the ruling are Australia, Brazil, Japan, Korea, the Netherlands, Turkey and the U.K.
Tue, Mar. 15, 9:17 AM
- Nucor (NYSE:NUE) -1.4% premarket after issuing downside guidance for Q1, seeing EPS of $0.23-$0.28, excluding a $0.03 LIFO charge, vs. $0.32 analyst consensus estimate.
- NUE expects to take a LIFO expense of $0.03/share in Q1, compared to a credit of $0.41/share in Q4 2015 and a credit of $0.03 in Q1 2015.
- NUE says it believes FY 2016 profitability will be slightly improved over 2015, driven by expected increases in the performance of the steel mills and steel products segments.
Nucor Corp. manufactures steel and steel products. The company operates through three segments: Steel Mills, Steel Products and Raw Materials. The Steel Mills segment produces and distributes sheet steel, plate steel, structural steel, and bar steel. It sells these products primarily to steel... More
Sector: Basic Materials
Industry: Steel & Iron
Country: United States
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