) is scheduled to report its third-quarter 2012 results before
the market opens on Thursday, October 18. The Zacks Consensus
Estimate for earnings for the quarter is 43 cents per share,
representing an estimated year-over-year decline of roughly
With respect to earnings surprises, the company has missed the
Zacks Consensus Estimate once in the preceding four quarters
while beating the same in the remaining three. Nucor has
delivered an average positive earnings surprise of 12.52% over
the trailing four quarters, implying that it has beat the Zacks
Consensus Estimate by the same measure.
Nucor has been struggling due to oversupply in the U.S. steel
market and the gloomy European market. Last month, the company
provided earnings guidance for the third quarter and expects
earnings between 30 cents and 35 cents per share. The forecast is
lower than Nucor's third-quarter 2011 earnings of 57 cents.
Previous Quarter Performance
Nucor reported adjusted (excluding special items) earnings of
43 cents per share for the second quarter of 2012, below the
Zacks Consensus Estimate of 47 cents. Profit (as reported)
dropped a substantial 63% year over year to $112.3 million (or 35
cents a share) from $299.8 million or 94 cents per share reported
a year ago.
Even though total tons shipped to outside customers increased
6% year over year to 5,925,000 tons, a 6% fall in average sales
price constrained Nucor's revenues. As a result, consolidated net
sales inched down slightly to $5.1 billion in the quarter from
$5.11 billion in the same period last year, but managed to edge
past the Zacks Consensus Estimate of $5.07 billion.
Estimate Revisions Trend
Estimates for Nucor have shown a slight upward revision in the
past week, with one out of the 13 analysts covering the stock
revising its earnings estimate upward for 2012. An identical
trend is witnessed for the third quarter, with 1 out of the 15
analysts making an upward revision in the estimate.
Estimates for 2012 demonstrate a negative bias over the last
30 days with 5 (out of 13) analysts lowering their forecasts and
3 analysts moving in the opposite direction. For the third
quarter, 4 analysts made upward revisions while 3 reduced their
forecasts over the last month.
Estimates for the third quarter remained unchanged over the last
week. For 2012, estimate increased by a penny over the past week.
Over the past month, estimates for the third quarter and 2012
have decreased by a penny and 2 cents, respectively. The current
Zacks Consensus Estimates for 2012 is $1.74 per share.
Nucor has a diversified client base and as such its business
isn't highly dependent on the conditions prevalent in a
particular geography. In addition, the company's cost structure
is highly variable, giving it the luxury of adjusting its costs
when the conditions call for. This enables Nucor to continue its
operations without closing down its facilities, even if the
market conditions in the steel industry are depressed.
Another remarkable fact about Nucor is that the company is
very agile when it comes to adjusting its production output. As
the company uses electric arc furnaces to produce steel, it can
easily adjust its output according to the demand in the industry
and avoid piling up inventories in adverse demand condition.
The steel industry is going through a difficult phase. There
is not enough demand for steel products due to 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
production. All these factors are proving to be very difficult to
manage for Nucor and hurting its profitability.
Moreover, the gloomy conditions in the euro zone are another
area of concern for Nucor since it is the largest market for
total U.S. exports. Steel imports have given rise to stiff
competition in the domestic market and the financial crisis in
Europe might give rise to the same conditions in the region.
We currently have a long-term Neutral recommendation on Nucor.
The company, which competes with
Commercial Metals Co.
United States Steel Corp.
), maintains a Zacks #3 Rank, which translates into a short-term
(1 to 3 months) Hold rating.
COMMERCIAL METL (CMC): Free Stock Analysis
NUCOR CORP (NUE): Free Stock Analysis Report
UTD STATES STL (X): Free Stock Analysis
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