Nucor Issues Q2 Earnings View - Analyst Blog

Nucor Corporation NUE expects higher profit on an year over year basis in second-quarter 2014 (ending Jul 5, 2014). But it sees earnings to come at the bottom end of its expectations that supported its qualitative guidance issued in April.

 

The NC-based steel maker envisions earnings for the second quarter in the band of 35 cents to 40 cents per share, higher than 27 cents logged a year ago. The projected results are comparable with 35 cents recorded in first-quarter 2014. Nucor, in its first-quarter 2014 earnings call, said that it expects improved earnings on a sequential basis in the second quarter.

 

Nucor's shares slipped roughly 2.2% last Friday to close at $50.52. 

 

For its Raw Materials division, Nucor expects an operating loss of $30 million or 6 cents per share at its new direct reduced iron DRI plant in Louisiana due to high product yield losses. A planned three-week outage has been initiated at the plant this month to make some process adjustments to cut yield losses. The company sees meaningful improvement in the performance of the DRI facility in the third quarter and expects profitability in late 2014.

 

The DRI facility, Nucor's largest project, came online in Dec 2013. The $750 million plant is expected to produce 2.5 million tons of DRI annually when the operations are in full swing.

 

Nucor expects results at its Steel Mills segment to improve modestly on a sequential basis in the second quarter as improved profitability in sheet and plate more than offset reduced profitability in the structural steel business. A planned outage related to the sheet piling capital project is expected to lead to lower shipments for structural steel in the quarter. Moreover, higher imports continue to impact pricing and margins.

 

Following a weaker seasonal performance in the first quarter, Nucor's fabricated construction products businesses returned to profitability in the second quarter, helped by improving conditions in the non-residential construction market. The company sees higher operating profits from these businesses moving ahead.

 

Nucor is seeing strength across end markets such as automotive, energy, heavy equipment and general manufacturing. Demand across these end-markets is healthy, lending support to the company's top line.

 

However, Nucor remains exposed to weak pricing and challenging steel market fundamentals. The company, like other steel makers, is hobbled by surging domestic steel imports.

 

Nucor currently retains a Zacks Rank #3 (Hold).

 

Some other stocks worth considering in the steel space include Universal Stainless & Alloy Products Inc. USAP, Grupo Simec S.A.B. de C.V.SIM and ThyssenKrupp AG (TYEKF). While Universal Stainless holds a Zacks Rank #1 (Strong Buy), Grupo Simec and ThyssenKrupp carry a Zacks Rank #2 (Buy).