Nucor Issues 1Q Guidance - Analyst Blog


Steelmaker Nucor Corporation ( NUE ) has provided its outlook for the first quarter of 2012. The company expects profits to be in the range of 30 cents to 35 cents per share, down from 43 cents per share in the fourth quarter of 2011 and 50 cents in the first quarter of 2011. For the upcoming quarter, the Zacks Consensus Estimate is 37 cents per share.

The current quarter earnings expectations also include a "Last In First Out" (LIFO) charge of 3 cents per share. The guidance provided by Nucor is at the low end of its expectations released in the last quarter.

The company expects flattening prices and compressed margins for the steel mill products due to increased competition and a revival in imports. However, unusual reduction in the raw material costs has affected steel mill consumers' buying patterns.

Nucor remains quite optimistic of the demand across end markets, including construction, despite excessive supply. The company is expecting profitable return from some of the end markets, such as manufactured goods including heavy equipment, energy and automotive.

Nucor's strong cash flows and balance sheet provide it flexibility to continue with its growth strategy. As of December 31, 2011, the company had a cash balance and short-term investments of $3.15 billion. In addition, Nucor has an untapped $1.5 billion revolving credit facility.

The company's financial strength allows it to invest in attractive growth opportunities through the economic cycle. In 2012, the company is expected to continue to invest in projects that will boost its long-term earnings power while providing attractive returns to the shareholders.

However, Nucor suffers from inflated raw material costs. Lower production rates at the mills have slowed the rate at which they consume the higher cost iron units, particularly pig iron inventories. The company also faces stiff competition from Commercial Metals Co. ( CMC ) and United States Steel Corp. ( X ).

Currently, we have a long-term (more than 6 months) Neutral recommendation on Nucor. The stock retains a Zacks #3 Rank, which translates into a short-term (1 to 3 months) Hold rating.

COMMERCIAL METL ( CMC ): Free Stock Analysis Report
NUCOR CORP ( NUE ): Free Stock Analysis Report

UTD STATES STL ( X ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: CMC , NUE , X

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