What happened
Shares of Nucor (NYSE: NUE), a stock in the typically stodgy steel sector, are off to the races this week. Nucor shares are up 10% heading into Friday's trading session, according to data provided by S&P Global Market Intelligence.
North America's largest recycler and leading steelmaker announced some new growth plans last week, but that's likely not the only reason the stock is on track to jump by double digits this week.
So what
Nucor is in a cyclical sector, and its shares have themselves cycled several times just within this year. When the share price approached $103 last week, it hit a level not seen since January. That seems to have been a level where investors decided it was time to buy. And the company itself may have been among those buyers.
Through the end of the third quarter, Nucor has repurchased 17.5 million shares in 2022. The company has returned over $2.7 billion to shareholders year to date through those buybacks as well as dividends. But the vast majority of that was spent on share repurchases.
In the last two years, Nucor has reduced its outstanding share count by about 15%, giving shareholders a bigger piece of ownership. And the stock has jumped more than 150% over that time, so the company has thus far been spending that money wisely.
Image source: Nucor.
Now what
Those repurchases have only come after the company has invested its cash back into the business, however. Last week, Nucor announced it would invest about $425 million to expand its flat-roll galvanizing capacity at one of its steel mills in South Carolina. It said its board has also approved a second galvanizing line investment in the western U.S., with details to be provided at a later date.
Since early 2021, Nucor has announced more than $9 billion in acquisitions or investments in existing facilities. The stock price seemed to have hit a trough last week, and investors who believe those growth investments will pay off for years to come decided that was a good time to buy.
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Howard Smith has positions in Nucor and has the following options: short January 2023 $175 calls on Nucor. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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