A month has gone by since the last earnings report for Nucor (NUE). Shares have added about 4.9% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Nucor due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Nucor's Earnings and Sales Surpass Estimates in Q2
Nucor’s profits declined year over year in second-quarter 2020. The company logged net earnings of $108.9 million or 36 cents per share, down from $386.5 million or $1.26 in the year-ago quarter. Earnings per share in the reported quarter topped the Zacks Consensus Estimate of 14 cents.
Nucor recorded net sales of $4,327.3 million, down 26.6% year over year. Nevertheless, the figure beat the Zacks Consensus Estimate of $4,118.9 million.
Total steel mills shipments in the second quarter were 4,769,000 tons, down 18% year over year. Total tons shipped to outside customers were down 19% year over year to 5,479,000 tons. Average sales price declined 10% year over year.
Steel mill operating rates were 68% in the second quarter compared with 84% in the prior-year quarter.
The company stated that despite challenging overall market conditions due to the coronavirus pandemic, demand in nonresidential construction markets was resilient in the second quarter.
Profitability of steel products unit declined sequentially in the second quarter.
Performance of steel mills unit also declined sequentially in the second quarter due to the impact of the pandemic. Notably, plate and sheet mills were affected due to weak oil and gas market activity and customer production disruptions.
Profitability in the raw materials unit improved marginally in the second quarter compared with first-quarter levels.
At the end of the second quarter, cash and cash equivalents surged 94.8% year over year to around $2.8 billion. Long-term debt was $5,279.1 million, up 24.7% year over year.
For the first six months, net cash generated from operating activities rose 13.6% year over year to around $1.3 billion.
Nucor expects third-quarter earnings to be similar to the second quarter levels. The company expects performance of downstream products unit to remain strong in the third quarter due to the continued resiliency of non-residential construction markets.
In the third quarter, performance in the steel mills unit is expected to be similar to the second quarter. While Nucor’s bar and structural mills benefit from non-residential construction market, sheet and plate mills remain challenged. Also, the company expects average selling prices to stay depressed.
Raw materials unit’s performance is projected to decline sequentially in the third quarter due to lower pricing.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 31.03% due to these changes.
At this time, Nucor has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Nucor has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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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.