Will Weaker Steel Prices Dent Nucor's (NUE) Earnings in Q3?
Nucor Corporation NUE is set to release third-quarter 2023 results ahead of the bell on Oct 24.
The U.S. steel giant surpassed the Zacks Consensus Estimate in each of the trailing four quarters. It has a trailing four-quarter earnings surprise of 9.6%, on average. It posted an earnings surprise of 3.9% in the last reported quarter. Weaker performance in the steel mills unit and lower selling prices are likely to have impacted Nucor’s third-quarter results.
Nucor’s shares are up 22.7% over a year, compared with the industry’s 35.3% rise.
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Let’s see how things are shaping up for this announcement.
What do the Estimates Say?
Nucor, last month, issued its earnings guidance for the third quarter. It anticipates third-quarter earnings in the range of $4.10-$4.20 per share, which indicates a decline on both sequential and year-over-year basis.
The Zacks Consensus Estimate for third-quarter consolidated revenues for Nucor is currently pegged at $8,534 million, reflecting a year-over-year decline of 18.7%.
A Few Factors to Watch
Lower profitability in the company’s steel mills segment is expected to have hurt its performance in the quarter to be reported. Nucor, in September, said that it sees lower earnings performance in the steel mills segment in the third quarter compared with the previous quarter due to lower pricing and, to a lesser extent, reduced volumes. The sheet mills within the segment are expected to have experienced the most significant impact on earnings.
Our estimate for sales tons to outside customers for steel mills is pegged at 4,705,000 tons for the third quarter, suggesting a decline from 4,774,000 tons reported in the prior quarter.
Nucor also expects sequentially lower earnings in the steel products segment in the third quarter due to lower realized prices and reduced volumes. It also sees lower profitability in the raw materials segment mainly due to margin compression at its DRI facilities and scrap processing operations.
Meanwhile, U.S. steel prices have witnessed a sharp downward correction. The benchmark hot-rolled coil (HRC) prices have retracted from their April 2023 peak of around $1,200 per short ton. Prices have fallen more than 40% from the highs hit in April, currently hovering around $700 per short ton. The downward drift partly reflects shorter lead times. The United Auto Workers strike against General Motors, Ford and Stellantis also weighed on HRC prices of late.
Weaker selling prices are likely to have impacted Nucor’s performance in the to-be-reported quarter. Our estimate for third-quarter average sales price per ton for the company’s steel mills unit stands at $1,038, suggesting a 19.9% year-over-year decline and an 11.1% sequential decrease.
Nucor Corporation Price and EPS Surprise
Nucor Corporation price-eps-surprise | Nucor Corporation Quote
Zacks Model
Our proven model does not conclusively predict an earnings beat for Nucor this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here.
Earnings ESP: Earnings ESP for Nucor is 0.00%. The Zacks Consensus Estimate for earnings for the third quarter is currently pegged at $4.18. 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 #4 (Sell).
Stocks That Warrant a Look
Here are some companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Element Solutions Inc ESI, scheduled to release earnings on Oct 25, has an Earnings ESP of +1.94% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for ESI’s earnings for the third quarter is currently pegged at 34 cents.
Methanex Corporation MEOH, slated to release earnings on Oct 25, has an Earnings ESP of +125.81% and carries a Zacks Rank #3 at present.
The consensus mark for MEOH’s third-quarter earnings is currently pegged at a loss of 8 cents.
Kinross Gold Corporation KGC, scheduled to release third-quarter earnings on Nov 8, has an Earnings ESP of +8.70%.
The Zacks Consensus Estimate for Kinross' earnings for the third quarter is currently pegged at 9 cents. KGC currently carries a Zacks Rank #3.
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Nucor Corporation (NUE) : Free Stock Analysis Report
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Kinross Gold Corporation (KGC) : Free Stock Analysis Report
Methanex Corporation (MEOH) : Free Stock Analysis Report
