New Headwinds For Nucor, But Still Some Value
Stephen Simpson, CFA
Stephen Simpson, CFA
Tue, Jul. 26, 6:54 PM
- U.S. Steel (NYSE:X) +4.1% AH after reporting a narrower than expected Q2 loss and saying it expects FY 2016 EPS of ~$0.34.
- The company expects ~$850M in adjusted EBITDA for the full year, compared with its April outlook of nearly $400M, saying "the significant improvements we have made to our earnings power through our Carnegie Way transformation will become more apparent as market prices recover from the very low levels at the end of 2015."
- U.S. Steel says pricing increases contributed to a strong Q2, and expects more price improvement in H2 of the year; its European segment posted its best results in nearly eight years, its flat-rolled segment returned to profitability, and an improving cost structure helped margins.
- Steel names AK Steel (NYSE:AKS), Nucor (NYSE:NUE), Steel Dynamics (NASDAQ:STLD) and Reliant Steel (NYSE:RS) have reported better than consensus earnings this quarter on the heels of surging steel prices.
Thu, Jul. 21, 3:58 PM
- Nucor (NUE -3.1%) is lower even after reporting Q2 EPS of $0.73, ahead of analyst consensus; NUE had pre-annouced a month ago for EPS of $0.65-$0.70 vs. $0.56 consensus at the time.
- Even with a Y/Y revenue decline to a below consensus $4.25B, NUE said the overall operating rate at its steel mills rose 10% in the quarter from the previous year, as the cost of energy and scrap materials dropped.
- NUE says average Q2 sales price per ton rose 9% Y/Y but fell 9% Y/Y, but the company expects another strong Q/Q improvement in its earnings for Q3.
- NUE announced yesterday that it will pay $29M to purchase Joy Global's steel plate mill in Longview, Tex.
Wed, Jul. 20, 3:56 PM
- Nucor (NUE -2.8%) is downgraded to Neutral from Buy with a $56 price target at BofA Merrill Lynch, citing a more cautious view on H2 market conditions, fuller valuation and cautious comments on long products from Steel Dynamics (STLD -1.5%).
- The downgrade comes as NUE is scheduled to report Q2 results tomorrow, when the firm believes investors will focus on how much spare capacity the company might be able to contribute to a relatively tight sheet market after reportedly operating at 105% of capacity at its sheet mills.
- BofA adds that NUE has more long products exposure than STLD at ~39% of 2015 sales, and has been growing volumes in its fabricated segment.
Wed, Jun. 15, 3:25 PM
- Steel companies are surging after Nucor (NUE +2.1%) released better than expected guidance and Bank of America upgraded U.S. Steel (X +8.4%) to Neutral from Underperform with an $18 price target, raised from $10, citing more stable earnings and higher steel prices.
- Nucor's upbeat commentary follows Steel Dynamics' (STLD +3.1%) upside Q2 guidance issued earlier this week, citing improved metals spread and shipments, and both of which follow May's U.S. Commerce Department ruling that it is imposing a 266% tariff on Chinese cold-rolled steel imports.
- BofA now forecasts $673M in 2016 EBITDA for U.S. Steel vs. consensus forecasts of $424M, based on the higher prices.
- The firm also praises U.S. Steel's ability to push out its debt maturities, although leverage remains steep with total debt at ~5x projected EBITDA.
- Also: AKS +8.3%, CLF +3.7%, MT +4.1%.
Wed, Jun. 15, 9:19 AM
- Nucor (NYSE:NUE) +1.6% premarket after issuing upside guidance for Q2 earnings; NUE now sees Q2 EPS of $0.65-$0.70 vs. the $0.56 analyst consensus estimate, Q1 EPS of $0.22 and year-ago quarter EPS of $0.39.
- NUE expects a "much improved" Q2 performance in the steel mills segment due to higher average selling prices and improved volumes, and notes that sheet mills have benefited from lower inventory levels in the supply chain, mainly at service centers, and decreased levels of imports.
- NUE also sees improvement in the downstream products segment due to seasonal factors and the gradual improvement in non-residential construction markets.
- Related tickers include X, AKS, STLD.
Wed, Jun. 8, 10:18 AM
- AK Steel (AKS +10.5%) surges more than 10% as Credit Suisse upgrades shares to Outperform from Neutral with a $7 price target, doubled from $3.50, after the firm increases its U.S. steel price deck.
- Credit Suisse says it remains "very bullish" on the U.S. steel industry, and its new supply/demand model for the U.S. flat rolled market indicates continued deficits for value add sheet into Q3, supporting prices well above fair value levels.
- The firm raises its price targets on all steel stocks in its coverage universe except Commercial Metals (CMC +1.9%), owing to rebar spread risks.
- Steel stocks (SLX +2.8%) are broadly higher in early trading: X +6.8%, MT +3.9%, STLD +3.8%, NUE +2.4%, WOR +1.5%, ZEUS +1.4%.
Mon, Jun. 6, 11:58 AM
- Steel stocks (SLX +2.1%) are higher as U.S. Treasury Secretary Lew blames China for flooding low-cost steel into the U.S. and other markets.
- Lew is urging China to cut excess steel production, as the two countries open high-level talks overshadowed by tension over the South China Sea.
- "The Chinese government is... engaged in economic warfare against the U.S. and sadly, they are winning,” Nucor (NUE +0.3%) CEO John Ferriola says in a WSJ interview, adding that China two months ago set a new production record after spending two years promising to cut production.
- Steel producers are mostly higher: X +2.9%, MT +2.1%, CLF +2.8%, AKS -1%, STLD +0.3%, RS +0.4%.
Thu, May 26, 8:19 AM
- U.S. steel companies surge in premarket trading after the U.S. announced heavy anti-dumping and anti-subsidy duties on corrosion-resistant steel from China, in the latest U.S. clampdown on a glut of steel imports.
- The Commerce Department issued duties of as much as 450% on Chinese producers of corrosion-resistant steel, as well as duties of 3%-92% on producers from Italy, India, South Korea and Taiwan.
- The final U.S. anti-dumping duties on the Chinese products replace preliminary duties of 256% issued in December.
- Last week the Commerce Department issued punitive tariffs of more than 500% on Chinese cold-rolled flat steel.
- AKS +7%, X +5.6%, CLF +4.8%, NUE +2.3%, STLD +1.6% premarket.
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
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, 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.
Fri, Mar. 11, 11:39 AM
- Credit Suisse is bullish on the U.S. steel sector (SLX +0.6%), believing the U.S. market seems close to a cyclical low point for volume and pricing, with a very strong outlook for both for the rest of 2016.
- Global prices have surged in recent months, and the firm thinks U.S. prices likely will experience the strongest recovery, increasing with the global market and premiums to foreign material likely expanding from trade case protection.
- Credit Suisse initiates U.S. Steel (X +1.8%) with an Outperform rating, expecting the company to generate high incremental margins as volume recovers and seeing 2016 free cash flow and EBITDA beating expectations; X also has the highest leverage to spot market recovery, the firm says.
- However, the firm rates AK Steel (AKS -4.5%) at Underperform, citing the high fixed cost base and Ashland outage as major headwinds; it expects AKS to burn cash at a rate of $43M in 2016 and $109M in 2017.
- Steel Dynamics (STLD +0.7%) also is rated Outperform, while Commercial Metals (CMC -0.1%) and Nucor (NUE +0.3%) are rated Neutral.
Wed, Mar. 9, 1:58 PM
- US Steel (X +2.6%) and AK Steel (AKS +2.7%) have been outperforming Steel Dynamics (STLD +0.1%) and Nucor (NUE -1.5%) of late, but Nomura analysts believe the outperformance probably will not last.
- High short interest and integrated producers’ higher degree of fixed cost leverage have supported sharp rallies in X and AKS shares, while deteriorating spot long product prices have raised concerns about mini-mills’ long product margins, concerns Nomura believe are partially misplaced, as weakness is mainly tied to commodity-grade long products; however, most of STLD's and NUE's profitability is concentrated in areas that are relatively insulated from imports, the firm says.
- Nomura says STLD remains its top pick in the space due to a favorable product mix - less plate and rebar than NUE - and the continued benefits of the Columbus integration; the firm raises its price targets for STLD to $24 from $21, NUE to $50 from $47, X to $11 from $8, and AKS to $3.50 from $2.50.
Tue, Mar. 8, 11:49 AM
- The surge in iron ore prices is positive for U.S. steel producers, but supply cuts from domestic capacity curtailments and positive trade rulings are the primary drivers pushing domestic steel prices higher, J.P. Morgan analysts say.
- The firm reiterates that the U.S. steel producers including U.S. Steel (X -10.7%), AK Steel (AKS -10.4%), Steel Dynamics (STLD -2%) and Nucor (NUE -0.9%) are its top stock picks, as they offer the greatest upside from supply cuts in the near-term.
- JPM also notes the dramatic improvement in earnings and free cash flow at Cliffs Natural Resources (CLF -15.4%) at spot iron ore prices; while it has not changed its iron ore price forecast of $40/metric ton for 2016 and $42 for 2017, CLF's estimated 2016 and 2017 EPS would increase to $0.84 and $1.22 from respective losses of $0.99 and $0.59, at current spot prices, and 2016 and 2017 FCF would move to positive $225M and $294M from negative $102M and $32M.
- Earlier: Lots of bearish talk after iron ore's record run
Wed, Mar. 2, 2:47 PM
- Steel company shares are soaring following news of U.S. anti-dumping duties in the cold-rolled sheet trade case, with China receiving a 266% duty, which should effectively lock the country out of the U.S. market; Japan and Brazil were nailed with respective duties of 71% and 39%.
- J.P. Morgan analysts call the tariffs a win for U.S. steel stocks including U.S. Steel (X +22%), AK Steel (AKS +17.4%), Steel Dynamics (STLD +5.2%) and Nucor (NUE +2.6%), as trade cases filed by the U.S. and around the world eventually will close the door to the export market for surplus Chinese steel, and China will have to cut its steel capacity to come in line with Chinese domestic demand.
- With steel prices rebounding off of a bottom and the companies clearly demonstrating they have enough liquidity, J.P. Morgan believes the stocks should continue to outperform as shorts find it difficult to portray a possibility of near-term bankruptcies.
- Also: MT +11.7%, CLF +19.5%, CMC +1.2%, WOR +2.9%, ZEUS +13.2%, SLX +6.9%.
Nucor Corp. engages in the manufacture of steel and steel products. It operates through the following segments: Steel Mills, Steel Products, and Raw Materials. The Steel Mills segment produces and distributes sheet, plate, structural, and bar steel. The Steel Products segment includes steel... More
Sector: Basic Materials
Industry: Steel & Iron
Country: United States