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Nucor's (NUE) Q3 Earnings Beat, Sales Hurt by Lower Prices

Steel giant Nucor CorporationNUE generated profit of $227.1 million or 71 cents a share in the third quarter of 2015, a drop of roughly 7.5% from $245.4 million or 76 cents per share logged a year ago. Earnings per share, however, surpassed the Zacks Consensus Estimate of 49 cents by a wide margin.

Revenues fell around 26% year over year to $4,225.5 million due to lower pricing and shipments. The figure also missed the Zacks Consensus Estimate of $4,586 million.

Nucor Corporation - Earnings Surprise | FindTheBest

Operating Stats

Total tons shipped to outside customers in the third quarter of 2015 were 5,883,000, down 13% from 6,874,000 in the third quarter of 2014. Total mill shipments also declined 10% year over year. Average sales price in the reported quarter were flat sequentially, but down 15% year over year.

Overall operating rates at the company's steel mills plunged to 69% in the third quarter from 81% a year ago and 73% in the preceding quarter.

Segment Highlights

Nucor witnessed improved performance in its Steel Mills segment in the third quarter of 2015 compared to the previous quarter as sequential lower average cost of inventory led to higher margins. According to the company, automotive markets remain strong, while non-residential construction markets have been showing continued improvements.

However, weakness in energy, heavy equipment and agricultural markets prevails. Imports for the first nine months of 2015 accounted for 30% of the finished steel market, putting considerable pressure on the segment's performance.

Operating results in the company's Downstream Products segment improved sequentially in the third quarter on the back of higher volumes and lower steel costs.

The Raw Materials segment's performance in the quarter declined sequentially, owing to higher loss at Nucor's steel plant in Louisiana and poor performance in the company's scrap processing businesses. However, Nucor's direct reduced iron (DRI) facility at Louisiana recorded strong sequential improvement in performance during the reported quarter.

Financial Position

Nucor exited the quarter with cash and cash equivalents of $1,895.4 million, up around 35.8% year over year. Long-term debt was $4,360.6 million, flat year over year. The company also has an untapped $1.5 billion revolving credit facility.

Cash flow from operations was $1,757.3 million for the first nine months of 2015, representing a year-over-year rise of roughly 89.9%.

Guidance

Nucor anticipates lower earnings in the fourth quarter of 2015 compared to the third quarter owing to continued challenges in the global steel industry. Slow economic growth in China has been creating further overcapacity, resulting in considerable high levels of steel imports into the U.S.

Nucor also anticipates weaker performance in its Downstream Products unit in the fourth quarter owing to year-end seasonality. Additionally it also anticipates modestly lower performance in the raw materials segment owing to lower scrap and metal commodity prices. However, Nucor remains optimistic as it has been seeing consistent improvement in the automotive and non-residential construction markets - the largest end market of the company.

Zacks Rank

Nucor currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the basic materials sector include AK Steel Holding Corp. AKS , Asanko Gold Inc. AKG and Pretium Resources Inc. PVG , all carrying a Zacks Rank #2 (Buy).

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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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