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US Steel Investors: Getting Ready for 3Q17 Earnings

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Part 5
US Steel Investors: Getting Ready for 3Q17 Earnings PART 5 OF 7

Nucor’s 3Q17 Guidance Disappointed—Could Earnings Be Any Better?

Nucor’s 3Q17 guidance

Nucor (NUE) and Steel Dynamics (STLD) provide their quarterly earnings guidance roughly two weeks before a quarter draws to a close. Other companies, including Cleveland-Cliffs (CLF), and U.S. Steel Corporation (X), give annual earnings guidance during their quarterly earnings calls.

Nucor’s 3Q17 Guidance Disappointed—Could Earnings Be Any Better?

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Lower earnings

Nucor expects to post EPS (earnings per share) of $0.75–$0.80 in 3Q17. To put this in context, consider that the company posted EPS of $1 in 2Q17 and $0.95 in 3Q16. Nucor expects its 3Q17 earnings to fall on a yearly basis as well as a sequential basis. The company’s guidance came in as a disappointment to markets while US steel prices were fairly strong. This was the second consecutive quarter when Nucor’s guidance was lower than expected.

According to Nucor, “Despite high utilization rates at our sheet mills, continued import pressure has not allowed pricing to keep pace with increasing raw material costs during the third quarter of 2017.” But it’s worth noting that despite margin pressure, Steel Dynamics—which, like Nucor, mainly relies on steel scrap—expects its 3Q17 EPS to be at least equal to the sequential quarter.

Unplanned outage

Along with lower profitability at steel mill operations, Nucor also expects lower earnings at its plate mills operations. According to Nucor, “The forecasted earnings of our plate mills are expected to be significantly less than what was expected when we provided our qualitative guidance in July.”  Nucor also expects lower earnings in its raw materials segment due to an unplanned outage at its Louisiana DRI (direct reduced iron) facility.

Analysts polled by Thomson Reuters expect Nucor to deliver EPS of $0.89 in 3Q17, which is higher than the company’s guidance.

In the next part of this series, we’ll look at the key updates that markets (SPY)(SPX-INDEX) might watch out for in Nucor’s 3Q17 earnings call.

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