Nucor Upgraded On US Infrastructure Spending Prospects

Nucor Corporation NUE traded higher Tuesday after one Street analyst gave the stock his vote of approval.

The Analyst

KeyBanc Capital Markets analyst Philip Gibbs upgraded Nucor from Sector Weight to Overweight and and set a $77 price target.

The Thesis

Self-help growth initiatives in fabrication and raw materials will provide Nucor with more of an earnings boost in 2019 than previously anticipated, Gibbs said in the upgrade note. (See the analyst's track record here.) 

KeyBanc raised its 2018 EPS forecast from $4.68 to $5.40.

“Further, company-specific drivers could add 20 percent to our EPS power view over time, while visible FCFE momentum [$3.3 billion from the second half of 2018 to 2019] and optionality to any nascent pickup in infrastructure spending provide further upside potential," the analyst said. 

Steel growth projects, stock buybacks and other drivers could push 2019 EPS as high as $6.50 and KeyBanc’s price target as high as $85, Gibbs said. 

KeyBanc is targeting 2019 steel prices of $675/ton for HRC.

Nucor’s pristine balance sheet is only getting stronger, Gibbs said. 

Attention will slowly shift away from trade war uncertainty back to Nucor’s organic growth pipeline and a potential boost from U.S. infrastructure spending, in KeyBanc's view.

The Trump administration’s top priority is the trade war, but that attention could soon shift to domestic infrastructure, Gibbs said; roughly half of Nucor’s demand comes from nonresidential construction spending.

KeyBanc is predicting that Nucor will top consensus EPS and revenue expectations in the second quarter.

Price Action

Nucor shares were trading 2.68 percent higher at $68.51 at the time of publication Tuesday.

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