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Will Higher Sales Prices Aid Nucor's (NUE) Q1 Earnings?

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Zacks Equity Research
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Nucor Corporation NUE is scheduled to come up with first-quarter 2021 results ahead of the bell on Apr 22. The rally in domestic steel prices on the back of on an upswing in demand and supply constraints is likely to have driven the steel giant’s sales and margins in the first quarter. The benefits of higher plate and sheet sales prices are expected to reflect on the performance of the company’s steel mills business.

Higher Prices to Drive Margins

Profitability across Nucor’s steel mills and raw materials segments is expected to have boosted by higher average sales prices in the March quarter. In the steel mills unit, sheet and plate are likely to have witnessed a significant increase in sales prices in the first quarter, driving results for these product groups.

The Zacks Consensus Estimate for first-quarter average sales price per ton for the steel mills unit stands at $935, suggesting a 37.5% year-over-year increase. The same for plate products is pinned at $967, reflecting a year-over-year rise of 30.7%. The Zacks Consensus Estimate for sales price per ton for bars is also pegged at $758, indicating a 14.5% year-over-year increase. The same for sheet products stands at $1,007, which reflects a year-over-year increase of 54.9%.

Moreover, the consensus estimate for average sales price per ton for the company’s steel products unit is pegged at $1,514, suggesting a year-over-year rise of 10.3%.

Notably, U.S. steel prices witnessed a significant upswing during the March quarter and hit all-time highs driven by an upturn in demand, supply shortages and higher steel input costs.

It is worth noting that U.S. steel prices plummeted at a breakneck pace in 2020, hurt by coronavirus-led demand destruction. The benchmark hot-rolled coil (“HRC”) prices plunged to a pandemic-induced multi-year low of roughly $440 per short ton in August 2020.

However, HRC prices started to recover in September and have catapulted to levels not seen since 2008 on U.S. steel mills’ back-to-back price hike actions, tight supply and solid pent-up demand, especially in automotive and construction. Notably, HRC prices zoomed past $1,200 per short ton for the first time in February 2021 and cruised above the $1,300 per short ton level last month. Prices shot up roughly 200% from the August 2020 low. The demand-supply imbalance is the main reason behind the surge in steel prices. Higher steel prices are likely to have provided a boost to Nucor’s selling prices and supported its top and bottom lines in the first quarter.

Nucor Corporation Price and EPS Surprise

Nucor Corporation Price and EPS Surprise
Nucor Corporation Price and EPS Surprise

Nucor Corporation price-eps-surprise | Nucor Corporation Quote

Overall Expectations

The Zacks Consensus Estimate for first-quarter consolidated revenues for Nucor is currently pegged at $7,475 million, reflecting a year-over-year increase of 32.9%. The consensus estimate for earnings is $3.09, which indicates a substantial rise from the prior-year reported number.

Click here to know how the company’s overall first-quarter performance is expected to be.

Zacks Model

Our proven model predicts an earnings beat for Nucor this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earning beat.

Earnings ESP: Earnings ESP for Nucor is +0.65%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Nucor currently carries a Zacks Rank #1.

Stocks That Warrant a Look

Here are some companies in the basic materials space you may want to consider as our model shows they too have the right combination of elements to post an earnings beat this quarter:

Dow Inc. DOW, scheduled to release earnings on Apr 22, has an Earnings ESP of +0.35% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

United States Steel Corporation X, scheduled to release earnings on Apr 29, has an Earnings ESP of +20.00% and carries a Zacks Rank #3.

The Mosaic Company MOS, scheduled to release earnings on May 3, has an Earnings ESP of +3.06% and carries a Zacks Rank #3.

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United States Steel Corporation (X) : Free Stock Analysis Report

Nucor Corporation (NUE) : Free Stock Analysis Report

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The Mosaic Company (MOS) : Free Stock Analysis Report

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