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Nucor to Shut Nuconsteel

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Nucor Corp. (NUE'>NUE) announced plans to exit the light-gauge steel framing sector by closing its Nuconsteel division in the coming months. The company’s decision was based on the fact that the fabrication of residential and commercial light gauge steel framing was not giving profitable returns to the company. Nucor did not reveal the number of employees, who would be affected by the shutdown.

Nuconsteel has operations in Denton, Texas, and Dallas, Georgia. In November 2001, Nucor entered into the residential and commercial light gauge steel framing business by acquiring Itec Steel, Inc. which was named Nuconsteel afterwards.

In October 2011, Nucor released its third-quarter earnings results. The company reported net earnings of $181.5 million, or 57 cents per share (excluding special items) in the quarter, beating the Zacks Consensus Estimate of 51 cents per share. This was a significant increase from 23.5 million, or 7 cents per share (excluding special items) reported in the year-ago quarter.

Nucor’s third-quarter earnings exceeded the same in the last year's quarter, but declined from the second quarter of 2011 driven by lower steel prices and significantly lower metal margins.

Consolidated sales surged 27% year over year to $5.25 billion, beating the Zacks Consensus Estimate of $4.86 billion. The growth was attributable to an increase of 24% in average price per ton and a rise of 3% in shipments (to 5.8 million tons) to outside customers.

Nucor expects fourth-quarter earnings to be lower than the third-quarter level. The company also expects margin compression in the sheet market in the fourth quarter of 2011.

Furthermore, the company forecasts a smaller compression in plate margins due to imports. The magnitude of margin compression will be favorably impacted by expected lower scrap costs in the fourth quarter.

Nucor Corp., which faces stiff competition from Commercial Metals Co. (NYSE:CMC - News) and United States Steel Corp. (NYSE:X - News), has a Zacks #3 Rank (Hold) on its stock for the short term. We currently provide a long-term Neutral recommendation on the stock for the long term.

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