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Is the Market Underestimating Nucor’s Earnings Capacity?

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Earnings capacity

Nucor (NUE) reported its 3Q15 financial results on October 22. The company reported net income of $227.1 million, which translates into earnings per share (or EPS) of $0.71.

The company had provided an EPS guidance of $0.45–$0.50. Nucor has generally posted earnings that are better than its guidance.

Wall Street also seems to underestimate Nucor’s earnings capacity. According to estimates compiled by Bloomberg, analysts were expecting an EPS of $0.47 in 3Q15. Nucor’s actual EPS came in significantly higher than the consensus estimates. Nucor has posted better-than-expected earnings for five consecutive quarters, as can be seen in the graph above.

Currently, Nucor forms 0.33% of the iShares Core High Dividend ETF (HDV).

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Stock jumped

The markets also rewarded Nucor for its better-than-expected earnings, sending its stock up more than 5.5%. Nucor’s 3Q15 earnings came in three days after Steel Dynamics’ (STLD) earnings missed analyst estimates. Steel Dynamics took a hit on its earnings on falling steel prices.

More earnings are expected in the coming weeks. AK Steel’s (AKS) 3Q15 earnings are expected on October 27 while U.S. Steel Corporation (X) is expected to release its earnings on November 3.

Series overview

In this series, we’ll analyze Nucor’s 3Q15 earnings. We’ll explore what factors drove Nucor’s 3Q15 financial performance. We’ll also analyze Nucor’s outlook amid the challenging steel market conditions.

We’ll also discuss the key takeaways from the company’s earnings conference call. This should help you understand why Nucor was able to post better-than-expected results and how things could play out in the coming quarters.

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