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Nucor to Make Capital Investment at South Carolina Bar Mill

Zacks Equity Research

Nucor Corporation NUE will make a capital investment at its bar mill in Darlington, SC. The move will add vacuum degassing to its engineered bar capabilities.

Also, addition of the capability will allow the mill to make engineered bar products as per some of the most stringent quality specifications in the industry. The company expects the vacuum degassing system to start operations in late 2020.

Per the company, the strategic investment is complementary to current bar mills that mainly produce engineered bar products in Norfolk, NE, Memphis, TN, and Wallingford, CT. It is likely to position the company to better serve customers in the Southeastern United States. The investment will also support the increasing demand in the region for high-quality automotive and other specialty steel applications.

Notably, Nucor Steel South Carolina is the first steel mill built by the company. It produces steel by melting recycled scrap in an electric arc furnace (“EAF”), thus initiating a revolutionary process. At present, roughly 70% of the steel made in the United States is produced using EAFs.

Shares of Nucor have lost 19.2% in the past year compared with the industry’s 38.1% plunge.

The company’s adjusted earnings per share were $1.55 in the first quarter of 2019, which beat the Zacks Consensus Estimate of $1.50. Net sales rose roughly 9.5% year over year to $6,096.6 million, which topped the Zacks Consensus Estimate of $6,034.1 million.

Nucor expects second-quarter 2019 earnings to be in line with first-quarter figure, barring the gain on the sale of the equity method investment.

The company expects weak margins for plate and sheet mill products to be offset by improving margins for bar and structural mill products.

Profitability in the steel products unit is expected to improve considerably in the second quarter compared with the first quarter. Improved weather conditions and typical seasonal patterns are likely to benefit nonresidential construction markets.

Performance of raw materials unit is expected to decline sequentially in the second quarter due to margin compression in the DRI businesses.

Zacks Rank & Key Picks

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

Some better-ranked stocks in the basic materials space are Materion Corporation MTRN, Fortescue Metals Group Ltd. FSUGY and AngloGold Ashanti Limited AU, all currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Materion has an expected earnings growth rate of 23.1% for 2019. The company’s shares have gained 11.5% in the past year.

Fortescue Metals has an expected earnings growth rate of 101.5% for the current year. The company’s shares have surged 76.3% in a year’s time.

AngloGold has an expected earnings growth rate of 86.8% for 2019. Its shares have rallied 39.8% in a year’s time.

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