Is Nucor (NUE) Poised to Beat Earnings Estimates in Q1? - Analyst Blog

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Nucor CorporationNUE is set to release first-quarter 2015 results before the opening bell on Apr 23, 2015.

In the last quarter, the steel giant delivered a positive earnings surprise of roughly 18.2% despite challenging conditions in the steel industry. Let's see how things are shaping up for this announcement.

Factors to Consider

Nucor delivered a solid performance in fourth-quarter 2014, with profits soaring 46% year over year to $713.9 million. The company also generated robust cash flow from operations, recording the strongest performance since 2008. Per management, 2014 started reaping the benefits of the company's strategic investments, which include significant capital spending in a number of growth projects.

Nucor is also working to expand its product portfolio to include more value and higher margin profits. In 2015, the company expects to gain from these investments as well as overcome the current volatility in the steel industry.

On the flip side, Nucor expects a decline in earnings in first-quarter 2015 compared with first-quarter 2014. Owing to the recent drop in oil prices , Nucor anticipates that customer inventory reduction charges will impact market conditions for the Steel Mills segment. However, there is a scope for improvement in energy markets when inventory destocking is completed. Import levels are also anticipated to remain high in 2015.

Nucor is presently in a strong financial position as of the end of 2014, with undrawn $1.5 billion unsecured revolving credit facility, scheduled for maturity in Aug 2018. The company's strong balance sheet and healthy cash flow generation are expected to drive growth in the future.

Moreover, this financial strength has enabled the company to undertake strategic acquisitions and growth projects with long-term returns. Overall, Nucor is of the view that despite the adverse situations in the steel industry in 2015, the company's financial position will help it deliver long-term growth.

Earnings Whispers

Our proven model shows that Nucor is likely to beat earnings estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Nucor has the right combination of the two key components.

Zacks ESP: Nucor has an Earnings ESP of +7.14% - the difference between the Most Accurate estimate of 15 cents and the Zacks Consensus Estimate of 14 cents.

Zacks Rank #3 (Hold): Nucor's Zacks Rank #3 and ESP of +7.14% make us reasonably confident of a positive earnings beat.

We caution against stocks with a Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Here are some other companies in the basic materials sector you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Alamos Gold Inc. AGI has an Earnings ESP of +50.00% and a Zacks Rank #3.

The Dow Chemical Company DOW has an Earnings ESP of +11.54% and a Zacks Rank #3.

Agrium Inc. AGU has an Earnings ESP of +6.06% and a Zacks Rank #3.

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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 Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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