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Nucor (NUE) to Report Q1 Earnings: What's in the Offing?

Zacks Equity Research

Nucor Corporation NUE is set to release first-quarter 2019 results on Apr 23, before the opening bell.

The steel giant saw its profits (as reported) jump roughly 68% year over year in fourth-quarter 2018 on the back of higher year-over-year steel prices and shipments. Earnings per share of $2.07 also topped the Zacks Consensus Estimate of $1.93.

Nucor raked in net sales of $6,295.9 million for the quarter, up roughly 24% year over year. It also outpaced the Zacks Consensus Estimate of $6,289.3 million.

Nucor beat the Zacks Consensus Estimate for earnings in two of the trailing four quarters while missed twice. In this timeframe, the company delivered an average positive surprise of 2.8%.

Nucor’s shares have gained 12% so far this year, outperforming the industry’s 10.1% rise.



 

 

Factors at Play

Nucor, last month, issued downbeat earnings guidance for the first quarter. The company expects earnings per share in the band of $1.45-$1.50 for the first quarter. This reflects a sequential decline from $2.07 in the fourth quarter of 2018. Nevertheless, the projected figure reflects an increase from $1.10 in the year-ago quarter.

The company expects earnings in the steel mills unit to decline sequentially mainly due to lower average selling prices and margins in its sheet mill group. Per Nucor, the sheet pricing has reached the low point during the first quarter and the impact of recent price increases are encouraging. Moreover, the company is witnessing shipment delays to construction customers of steel products and steel mills units due to an unusually wet winter.

Performance in the Raw materials unit is forecast to decline sequentially due to margin compression in the DRI businesses, which was witnessing declining average selling prices since fourth-quarter 2018. Also, the company believes that the profitability in the steel products unit will be similar to fourth-quarter 2018 figures.

The Zacks Consensus Estimate for first-quarter consolidated revenues for Nucor is currently pegged at $6,034 million, reflecting an expected year-over-year increase of around 8.4%.

Lower expected prices will likely hurt Nucor’s profitability in the March quarter. Average sales price per ton for sheet is expected to fall 10.5% on a sequential comparison basis, as the Zacks Consensus Estimate is currently pegged at $768 for the first quarter.

Average sales price per ton for total steel mills is also expected to dip 1.2% sequentially in the first quarter, as the Zacks Consensus Estimate currently stands at $850. The Zacks Consensus Estimate for average steel product price per ton is pegged at $1,449, indicating a roughly 5% sequential decline.

Moreover, total steel mills shipments for the first quarter is expected to rise 4.4% sequentially, as the Zacks Consensus Estimate is currently pegged at 6,145,000 tons. Total tons shipped to outside customers are currently pegged at 6,699,000 tons, reflecting an expected increase of 0.2% sequentially.

Earnings Whispers
 
Our proven model does not show that Nucor is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. This is not the case here as you will see below:
 
Earnings ESP: Earnings ESP for Nucor is currently pegged at 0.00%. The Zacks Consensus Estimate for first-quarter earnings is currently at $1.50. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
 
Zacks Rank: Nucor carries a Zacks Rank #3, which when combined with a 0.00% ESP, makes surprise prediction difficult.  

Note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Nucor Corporation Price and EPS Surprise

 

Nucor Corporation Price and EPS Surprise | Nucor Corporation Quote

Stocks to Consider

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:

Arconic Inc. ARNC has an Earnings ESP of +0.65% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

AK Steel Holding Corporation AKS has an Earnings ESP of +8.72% and carries a Zacks Rank #3.

Ingevity Corporation NGVT has an Earnings ESP of +6.77% and carries a Zacks Rank #3.

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Ingevity Corporation (NGVT) : Free Stock Analysis Report
 
Arconic Inc. (ARNC) : Free Stock Analysis Report
 
AK Steel Holding Corporation (AKS) : Free Stock Analysis Report
 
Nucor Corporation (NUE) : Free Stock Analysis Report
 
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