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MARKETS LIVE BLOG:

STOCKS SLIDE AFTER META'S REALITY CHECK, DOWNBEAT GDP

U.S. first-quarter GDP report prompts inflation, growth concerns among investors

Why Is Nucor (NUE) Up 18.9% Since Last Earnings Report?

Zacks Equity Research
·4 min read

A month has gone by since the last earnings report for Nucor (NUE). Shares have added about 18.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Nucor due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Nucor's Q4 Earnings Surpass Estimates, Revenues Lag

Nucor logged net earnings of $398.8 million or $1.30 per share in fourth-quarter 2020, up from $107.8 million or 35 cents in the year-ago quarter.

Barring one-time items, adjusted earnings were $1.34 per share for the reported quarter, topping the Zacks Consensus Estimate of $1.22.

The company recorded net sales of $5,260.1 million, up around 3% year over year. The figure, however, missed the Zacks Consensus Estimate of $5,405.5 million.

Operating Figures

Total steel mills shipments in the fourth quarter were 5,793,000 tons, flat year over year. Total tons shipped to outside customers were also flat year over year at 6,486,000 tons.  Moreover, average sales price rose 3% year over year.

Steel mill operating rates were 87% in the fourth quarter, up from 83% in the year-ago quarter.

Segment Highlights

The company’s steel mills unit benefited from strong results at its bar and structural mills in the fourth quarter.

The steel products unit also had another strong quarter on the back of a resilient non-residential construction market.

Moreover, profitability in the raw materials unit improved in the reported quarter compared with third-quarter levels on improved performance of the company’s direct reduced iron facilities that are benefitting from higher average selling prices for raw materials.

FY20 Results

Earnings (as reported) for full-year 2020 were $2.36 per share, down from $4.14 per share a year ago. Net sales declined around 11% to roughly $20.1 billion.

Financial Position

At the end of 2020, cash and cash equivalents surged roughly 72% year over year to $2,639.7 million. Long-term debt was $5,271 million, up around 23% year over year.

Cash from operating activities fell 4% year over year to around $2.7 billion for full-year 2020.

Outlook

Nucor expects significantly higher earnings in the first quarter of 2021 compared with the fourth-quarter levels. While non-residential construction and automotive markets remain strong, conditions are improving in heavy equipment, agriculture, renewable energy and on-highway truck and trailer, the company noted.
 
The company expects increased profitability of the steel mills segment in the first quarter of 2021 on a sequential comparison basis. However, it sees sequentially lower profitability of the downstream steel products segment in the first quarter due to seasonal patterns and some margin compression associated with the delay between increases in selling prices and rising steel input costs.

Nucor also sees performance in the raw materials segment to significantly improve in the first quarter compared with the fourth quarter on higher raw materials selling prices.

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How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 39.06% due to these changes.

VGM Scores

Currently, Nucor has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Nucor has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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