Nucor (NUE) to Report Q4 Earnings: Is a Surprise in Store?

Nucor CorporationNUE is slated to release its fourth-quarter 2016 results ahead of the bell on Jan 31.

Nucor saw higher profits in third-quarter 2016, aided by improved steel prices. The company recorded a profit of $270 million, or $0.84 per share in the quarter, 18.9% rise from a profit of $227.1 million or $0.71 per share recorded a year ago.

However, adjusted earnings of 88 cents per share missed the Zacks Consensus Estimate of 90 cents. Revenues improved around 1.5% year over year to $4,290.2 million in the reported quarter but missed the Zacks Consensus Estimate of $4,539 million.

Nucor has surpassed the Zacks Consensus Estimate in two of the trailing four quarters, with an average beat of 23.16%.

Let's see how things are shaping up for this announcement.

Factors to Consider

Nucor has provided downbeat guidance for the final quarter of 2016. The steel giant expects earnings for the fourth quarter to be in the band of 30 cents to 35 cents per share as compared to 84 cents per share recorded in the previous quarter and 45 cents a share in the year-ago period.

Nucor expects earnings in the fourth quarter to decrease on a sequential basis mainly due to lower margins in the steel mills segment. The company expects a significant decline in performance in the Raw Materials segment in the fourth quarter due to lower pricing in its direct reduced iron ("DRI") facilities. Nucor also envisions reduced profitability in its Steel Products segment on a sequential comparison basis in the fourth quarter due to year-end seasonality.

Nucor has outperformed the Zacks categorized Steel-Producers industry over the past three months. The company's shares have gained 27.6% over the past three months while the industry gained 20.6% over the same period.

Nucor remains committed to expand its production capabilities and grow its business through strategic acquisitions. Notably, the acquisition of Gallatin Steel has strengthened the company's foothold in the Midwest market and has provided ample opportunities to boost shareholder value.

The buyout of Joy Global's steel plate mill will also enable Nucor to capture a growing share of higher value-added plate products. Recently, the company also completed its buyout of Chicago-based Independence Tube Corporation for $435 million which will allow Nucor to offer a broader selection of products to its fabricator and service center customers and reinforce the company's foothold in the key non-residential construction end-use market. The company has also agreed to purchase steel electrical conduit maker, Republic Conduit that will make Nucor the market leader in steel conduits.

Demand in the automotive market also remains healthy and may get better moving ahead, providing more strength to the company's top line. The company remains focused on achieving greater penetration of this major market. Nucor has entered into a joint venture with JFE Steel Corporation of Japan to build and operate a plant in Mexico that will supply sheet steel to the country's growing automotive market.

Nucor Corporation Price and Consensus

Nucor Corporation Price and Consensus | Nucor Corporation Quote

Earnings Whispers

Our proven model does not conclusively show that Nucor is likely to beat the Zacks Consensus Estimate in the fourth quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP : Earnings ESP for Nucor is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 34 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank : Nucor currently carries a Zacks Rank #2, which when combined with a 0.00% ESP, makes surprise prediction difficult.

Note that, we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

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

United States Steel Corporation X sports a Zacks Rank #1 and has an Earnings ESP of +266.7%. You can see the complete list of today's Zacks #1 Rank stocks here.

Kraton Corporation KRA holds a Zacks Rank #2 and has Earnings ESP of +3.23%.

Albermale Corporation ALB carries a Zacks Rank #2 and has an Earnings ESP of +2.67%.

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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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