On May 1, we issued an updated research report on steel maker
). While healthy momentum across automotive and energy markets
coupled with the company's key projects should support results
moving ahead, weak pricing and challenging steel market
fundamentals remain concerns.
Nucor, on Apr 24, posted healthy first-quarter 2014 results. Both
revenues and adjusted earnings for the quarter topped Zacks
Consensus Estimates. Profit climbed year over year on the back of
Nucor expects improved earnings on a sequential basis in the
second quarter. The company anticipates better performance from
steel mills and fabricated construction product businesses
despite the expected pricing and margins pressure at its Steel
Nucor, a Zacks Rank #3 (Hold) stock, is seeing strength across
end markets such as automotive, energy, heavy equipment and
general manufacturing. Demand across these end-markets is
healthy, lending support to the company's top line.
Moreover, Nucor is progressing well with its key projects that
are expected to boost its earnings power over the long-term. The
Louisiana direct reduced iron (DRI) facility, its largest
project, came online in Dec 2013. The $750 million plant is
expected to produce 2.5 million tons of DRI annually when the
operations are in full swing. The facility achieved peak
operating rate of above 90% during the first quarter.
Nucor is also aggressively investing to secure a low-cost supply
of natural gas on a long-term basis to cover its expected future
steelmaking and DRI production needs. The company also has an
impressive record of returning cash to shareholders.
However, the steel industry is still going through a difficult
phase and market fundamentals remains challenging in the U.S.
There is not enough demand for steel products due to persistent
weakness in construction end markets, resulting in excess supply.
Contributing toward this inventory glut are production ramp-ups
by domestic steel producers and rapid growth in Chinese
Nucor, like other steel makers, is hobbled by surging domestic
steel imports. Consumers in the U.S. are importing cheaper steel
from China, forcing domestic steel producers to sell at lower
Despite the U.S. steel industry's low capacity utilization,
imports continue to flow into the domestic market due to foreign
producers' overcapacity. Imported steel share of the domestic
market increased to as much as 36% during the first quarter.
CIRCOR INTL (CIR): Free Stock Analysis Report
NN INC (NNBR): Free Stock Analysis Report
NUCOR CORP (NUE): Free Stock Analysis Report
PRECISION CASTP (PCP): Free Stock Analysis
To read this article on Zacks.com click here.
Other Stocks to Consider
Other companies in the steel and related industry with favorable
Zacks Rank include
CIRCOR International, Inc.
Precision Castparts Corp.
). While NN carries a Zacks Rank #1 (Strong Buy), both CIRCOR and
Precision Castparts hold a Zacks Rank #2 (Buy).