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Nucor’s Financial Strength Could Be the Muscle behind Its Performance

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Nucor’s financial strength

Nucor Corporation (NUE) is now the largest steel company in the United States. It’s also the most valuable steel company, globally, by market capitalization. On September 4, 2015, Nucor’s market capitalization was $13.32 billion—even higher than ArcelorMittal SA (MT), the biggest steel company in the world.

Nucor is among the top dividend-paying steel companies and has paid 170 consecutive cash dividends. This accomplishment is no mean feat for a company in a cyclical industry like steel. Share prices of steel plays tend to be quite volatile compared to broader markets. The Vanguard Index Fund (VOO), which seeks to track the performance of the S&P 500 index, gives you access to broader equity markets.

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As the above graph shows, Nucor has delivered decent shareholder returns over different business cycles, even though its stock market performance hasn’t been too great over the last few quarters. But this performance weakness is mostly attributable to the general pessimism surrounding metal companies.

The chart above also shows the recent stock market performance of Nucor (NUE) beside steel giants like the United States Steel Corporation (X), Steel Dynamics (STLD), and AK Steel Holding Corporation (AKS).

Series overview

In this series, we’ll explore Nucor’s outlook as well as analyze how Nucor’s financial metrics stack up to other steel companies. We’ll also look at Nucor’s short-term and long-term drivers.

As Nucor is the only steel company in the US to have an investment-grade credit rating, we’ll discuss whether its financial strength can turn into superior stock market performance as well.

Noteably, Nucor announced a share buyback plan on September 2, 2015. But a key question remains: Is such a plan in the best interest for shareholders? Let’s explore this question in the next part of this series.

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