) reported adjusted (excluding special items) earnings of 45
cents per share in the third quarter of 2012, ahead of the Zacks
Consensus Estimate of 42 cents. The adjusted earnings exclude
cost associated with Skyline Steel buyout and loss on divestiture
of the assets of Nucor Wire Products Pennsylvania, Inc.
Profit (as reported) came in at $110.3 million (or 35 cents a
share), down 39% from $181.5 million or 57 cents per share
reported a year ago. The bottom line was hurt by lower operating
profits at the company's steel mills, especially in sheet and
An 8% fall in average sales price weighed on Nucor's revenues
in the quarter. Revenues slid 8.6% year over year to $4,801
million, missing the Zacks Consensus Estimate of $4,856 million.
Total tons shipped to outside customers edged down 0.3% year over
year to 5,768,000 tons in the reported quarter and total mill
shipments decreased 1.7% to 5,043,000 tons.
The average scrap and scrap substitute cost per ton used in
the quarter was $380, down 15% year over year. Also, overall
operating rates at Nucor's steel mills went down to 71% in the
third quarter from 74% in the prior year quarter.
The company had ample liquidity on its books in the quarter
with $2.54 billion in cash and cash equivalents, short-term
investments and restricted cash and investments. It also has an
untapped $1.5 billion revolving credit facility that will mature
in December 2016.
Nucor's Board declared a cash dividend of 36.5 cents per share in
September, which was the company's 158th quarterly cash dividend
on the trot. The dividend is payable on November 9, 2012, to
stockholders of record as of September 28, 2012.
Nucor expects that the fourth quarter will also have reduced
earnings after excluding one-time charges. The U.S. steel market
is reeling under the effect of oversupply and increased imports.
In addition, slow economic growth both globally and domestically
is expected through the end of 2012. Political and economic
uncertainty in global markets, along with volatility in scrap
prices is impacting the steel supply-chain stocking levels.
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.
However, Nucor has a diversified client base and as such its
business is not 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.
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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