Here's Why You Should Add Nucor (NUE) Stock to Your Portfolio
Nucor Corporation’s NUE stock looks promising at the moment. The steel giant is expected to benefit from healthy demand across its key end markets and a recovery in domestic steel prices. We are positive on the company’s prospects and believe that the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead.
Nucor has a Zacks Rank #1 (Strong Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 or 2 (Buy), offer the best investment opportunities for investors.
Let’s take a look into the factors that make Nucor an attractive choice for investors right now.
An Outperformer
Shares of Nucor have gained 15.6% over a year against the 4.2% rise of its industry. It has also outperformed the S&P 500’s 7.6% decline over the same period.
Image Source: Zacks Investment Research
Estimates Northbound
Earnings estimate revisions have the greatest impact on stock prices. Over the past two months, the Zacks Consensus Estimate for Nucor for the current year has increased around 12.7%. The consensus estimate for first-quarter 2023 has also been revised 13.6% upward over the same time frame.
Positive Earnings Surprise History
Nucor’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average being 7.7%.
Superior Return on Equity (ROE)
ROE is a measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12-months for Nucor is 42%, above the industry’s level of 22.5%.
Upbeat Prospects
Nucor is expected to gain from the strength in the non-residential construction market and improved demand in automotive. Steel demand in automotive is expected to improve in 2023 on the back of an easing of a global shortage in semiconductor chips that weighed heavily on the automotive industry for nearly two years. Low dealer inventories and pent-up demand are likely to be supporting factors. Higher demand is expected to drive Nucor's shipments.
Nucor, in its fourth-quarter call, said that it envisions operating income from its three business segments to rise sequentially in the first quarter of 2023. It expects earnings in the steel mills segment to be higher sequentially in the first quarter due to higher margins and volumes, with the biggest rise in profitability expected at its sheet mills.
The steel products segment’s overall profitability is projected to be higher sequentially in the first quarter. The company also sees raw materials segment earnings to rise in the first quarter due to increased volumes at DRI facilities and scrap recycling and brokerage operations.
The company is also expected to benefit from a recovery in domestic steel prices. Steel prices witnessed a sharp correction globally in 2022 as the Russia-Ukraine conflict, skyrocketing energy costs in Europe, persistently high inflation, interest rate hikes and the slowdown in China due to new COVID-19 lockdowns dwindled demand for steel across key end-use markets.
Notably, U.S. steel prices tumbled after surging to roughly $1,500 per short ton in April 2022 due to supply concerns stemming from the Russia-Ukraine war. The benchmark hot-rolled coil ("HRC") prices cratered to near the $600 per short ton level in November 2022. The downward drift partly reflects weaker demand and fears of a recession.
However, HRC prices have rebounded of late to above $1,100 per short ton, driven by U.S. steel mills’ price hike actions, supply tightness and a recovery in demand. A rebound in automotive demand is also expected to give a boost to steel prices this year. The benefits of the price recovery are likely to reflect on Nucor’s revenues and margins moving ahead.
Nucor Corporation Price and Consensus
Nucor Corporation price-consensus-chart | Nucor Corporation Quote
Stocks to Consider
Other top-ranked stocks worth considering in the basic materials space include Steel Dynamics, Inc. STLD, Olympic Steel, Inc. ZEUS and Ternium S.A. TX.
Steel Dynamics currently sports a Zacks Rank #1. The Zacks Consensus Estimate for STLD's current-year earnings has been revised 20.1% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Steel Dynamics’ earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 11.3%, on average. STLD has rallied around 55% in a year.
Olympic Steel currently sports a Zacks Rank #1. The Zacks Consensus Estimate for ZEUS's current-year earnings has been revised 60.6% upward in the past 60 days.
Olympic Steel’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 26.2%, on average. ZEUS has rallied around 54% in a year.
Ternium currently carries a Zacks Rank #2. The Zacks Consensus Estimate for TX’s current-year earnings has been revised 29.9% upward in the past 60 days.
Ternium beat Zacks Consensus Estimate in three of the last four quarters. It delivered a trailing four-quarter earnings surprise of 0.9% on average. TX’s shares have gained roughly 6% in the past year.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Steel Dynamics, Inc. (STLD) : Free Stock Analysis Report
Nucor Corporation (NUE) : Free Stock Analysis Report
Ternium S.A. (TX) : Free Stock Analysis Report
Olympic Steel, Inc. (ZEUS) : Free Stock Analysis Report
