) first-quarter 2012 earnings topped the Zacks Consensus Estimate
and were well above the company's own forecast. However, the North
Carolina-based company witnessed a decline in its profit in the
First Quarter Flashback
Net income (as reported) dipped roughly 9% year over year to
$145.1 million (or 46 cents a share) from $159.8 million or 50
cents per share reported a year ago.
Nucor's consolidated net sales increased 5% year over year to
$5.07 billion in the quarter. The jump in the top line was driven
by a 6% increase in average sales price per ton. However, the
increase in revenues was not enough to meet the Zacks Consensus
Estimate of $5.085 billion, as a 1% decline in total tons shipped
to outside customers weighed on the top line.
Nucor expects that its earnings will improve slightly in the
second quarter this year. The company is witnessing improved demand
in end markets such as heavy equipment, automotive, general
manufacturing and energy. However, a sluggish construction market
is still a cause for concern.
We have discussed the quarterly results at length here:
Nucor Beats on Bottom Line in 1Q
Agreement - Estimate Revisions
Estimates for Nucor have barely moved over the past week. Out of
14 analysts covering the stock, just one has decreased his/her
earnings estimate for fiscal 2012 over the past 7 days, with none
moving in the opposite direction. An identical trend applies to the
estimates for the second quarter, with one analyst decreasing
estimates out of the 12 covering the stock.
Estimates for 2012 demonstrates a strong negative bias over the
last 30 days with 12 (out of 14) analysts having downgraded their
forecasts with no reverse movement. For the second quarter,
estimates are negatively inclined over the past month with 10 (out
of 12) analysts lowering their forecasts as compared to no positive
Magnitude - Consensus Estimate Trend
Estimates for the second quarter and fiscal 2012 haven't moved
much over the last week, with the quarterly estimate dropping 2
cents and the fiscal 2012 estimate trimmed by 3 cents. The decline
has been much more pronounced over the last month, with estimates
for the second quarter having decreased by 20 cents and for fiscal
2012 by 51 cents.
The current Zacks Consensus Estimates for the second quarter and
2012 are 57 cents and $2.25, respectively.
Neutral on Nucor
Nucor is a leading producer of structural steel, steel bars,
steel joists, steel deck and cold finished bars in the U.S.,
operating around 123 facilities primarily in the U.S. and Canada.
The company follows a well-defined growth strategy by streamlining
and improving its existing operations, executing its raw material
strategy, developing Greenfield projects to enable it to benefit
from new technologies and opportunities, and through acquisitions
and joint-ventures in international markets.
Moreover, the company is quite agile when it comes to adjusting
its costs or production according to conditions prevalent in the
market. As a result, it does not have to close its facilities when
the conditions worsen.
In addition, Nucor has seen an improvement in utilization rates
across its facilities from the fourth quarter of 2011. They are
expected to improve further as the year goes on. Also, the recent
increment in prices of steel mill products is expected to have a
positive impact on earnings.
Nucor is witnessing slight improvement in demand in end-markets
such as automotive, heavy equipment, energy and general
manufacturing. The company believes that these markets will get
better going forward and drive its top line.
However, a sluggish construction market and financial turmoil in
the Eurozone might prove to be significant headwinds. There is
another cause for concern for Nucor coming out of China. Chinese
steel output has outpaced demand, resulting in an oversupply in the
industry. The industry oversupply could result in a price decline
of steel and hurt Nucor.
Moreover, from last year, automobile producers started complying
with the new Corporate Average Fuel Economy ("CAFE") mileage
requirements for new cars and light trucks produced by them. As a
result, automobile makers will now work towards meeting these new
standards, probably reducing the amount of steel used in cars and
trucks in order to improve fuel economy.
As this happens, demand for steel will fall, giving rise to
further oversupply of steel in North America and create downward
pressure on prices.
Nucor Corp. faces stiff competition from
Commercial Metals Co
United States Steel Corp.
). Currently, we have a long-term Neutral recommendation on the
stock, whereas it holds a short-term Zacks #4 Rank (Sell).
About Earnings Estimate Scorecard
As a PhD from MIT, Len Zacks proved over 30 years ago that
earnings estimate revisions are the most powerful force impacting
stock prices. He turned this ground breaking discovery into two
of the most celebrating stock rating systems in use today. The
Zacks Rank for stock trading in a 1 to 3 month time horizon and
the Zacks Recommendation for long-term investing (6+ months).
These "Earnings Estimate Scorecard" articles help analyze the
important aspects of estimate revisions for each stock after
their quarterly earnings announcements. Learn more about earnings
estimates and our proven stock ratings at
COMMERCIAL METL (CMC): Free Stock Analysis
NUCOR CORP (NUE): Free Stock Analysis Report
UTD STATES STL (X): Free Stock Analysis Report
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