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Nucor (NUE) Surpasses Q3 Earnings, Lags Revenue Estimates

Zacks Equity Research

Nucor Corporation NUE reported lower profits in third-quarter 2019. The steel giant logged net earnings of $275 million or 90 cents per share, down from $676.7 million or $2.13 in the year-ago quarter. Nevertheless, earnings beat the Zacks Consensus Estimate of 80 cents.

Nucor recorded net sales of $5,464.5 million, down roughly 19% year over year. The figure missed the Zacks Consensus Estimate of $5,595 million.

Operating Figures

Total steel mills shipments in the quarter were 5,788,000 tons, down 8% year over year. Total tons shipped to outside customers fell 7% year over year to 6,555,000 tons. Average sales price declined 13% year over year.

Steel mill operating rates fell to 83% from 92% in the year-ago quarter.

Nucor Corporation Price, Consensus and EPS Surprise

 

Nucor Corporation Price, Consensus and EPS Surprise

Nucor Corporation price-consensus-eps-surprise-chart | Nucor Corporation Quote

 

Segment Highlights

Profitability in the steel mills segment fell sequentially in the third quarter. Per the company, plate and sheet market conditions weakened in the quarter. Also, excess inventory throughout the supply chain led to continued destocking by customers.

The performance of steel products unit improved sequentially in the reported quarter, courtesy of strong non-residential construction market conditions.

Performance in the raw materials division declined sequentially in the third quarter due to margin compression in Nucor’s direct reduced iron (DRI) businesses. Moreover, the company’s Louisiana-based DRI facility started a planned outage that is likely to last till mid-November.

Financial Position

Nucor ended the third quarter with cash and cash equivalents of around $1.69 billion, down 12.7% year over year. Long-term debt was $4,287.6 million, up 1.3% year over year.

The company generated $2.12 billion cash from operating activities for the nine months, up 11.5% year over year.

Outlook

Nucor expects earnings to decline sequentially in the fourth quarter.

Profitability in the steel mills unit is likely to decline in the fourth quarter compared with third-quarter levels. The company expects lower steel prices at the end of the third quarter to impact its fourth quarter performance. However, the company believes that steel prices have bottomed out.  

Earnings of steel products unit is expected to decline slightly in the fourth quarter compared with third-quarter levels due to normal year-end seasonality.

The company expects profitability of the raw materials unit to decline sequentially in the fourth quarter due to the impact of its DRI facility's planned outage mentioned earlier along with further expected margin pressure.

Price Performance

Shares of Nucor have lost 11.6% in the past year compared with the industry’s 29.2% decline.



Zacks Rank & Key Picks

Nucor currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the basic materials space are Kinross Gold Corporation KGC, Franco-Nevada Corporation FNV and Agnico Eagle Mines Limited AEM, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kinross has an expected earnings growth rate of 170% for 2019. The company’s shares have surged 60.7% in the past year.

Franco-Nevada has a projected earnings growth rate of 35.9% for 2019. The company’s shares have rallied 42.8% in a year’s time.

Agnico Eagle has an estimated earnings growth rate of 158.6% for the current year. Its shares have moved up 42.9% in the past year.

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