uploads/2017/02/part-7-nue-2-1.png

Nucor’s Outlook: Why Are Its Top Executives So Optimistic?

By

Updated

Nucor’s outlook

Nucor (NUE) expects its fiscal 2017 financial performance to be better than in 2016. Other steel companies, including U.S. Steel (X) and Steel Dynamics (STLD), also seem optimistic about their expected 2017 performance. For steel companies (AKS), the industry’s outlook is as important—if not more important—than the company’s position in the industry.

In this article, we’ll analyze Nucor management’s views on the steel industry’s outlook. We’ll also see what makes Nucor’s top executives optimistic about the company’s outlook.

Article continues below advertisement

Industry outlook

Nucor expects nonresidential construction industry to continue its uptrend in 2017. Leading indicators also point to the strengthening nonresidential construction market, as can be seen in the graph above. Nucor is the leading steel supplier to the nonresidential construction sector.

According to Nucor, President Trump’s proposed trillion-dollar infrastructure investment plan could generate an annual incremental demand of 5 million tons of steel over the next ten years. This is a significant number and represents roughly 5% of the current US steel demand (SPY) (SPX).

Nucor management seems optimistic about the outcome in upcoming trade cases. Currently, trade cases against imports of plates and rebars are being investigated by US authorities. Nucor is a major supplier of these products.

Company’s outlook

Nucor (NUE) made two acquisitions in the pipe and tube market in 4Q16. Nucor’s management sounded optimistic about its recent acquisitions during the company’s 4Q16 earnings call. The company expects to increase its footprint in the nonresidential construction industry with these acquisitions. These acquisitions have also created pent-up demand for Nucor’s steel mill operations.

In the next article, we’ll examine how analysts are rating U.S. Steel after its 4Q16 earnings beat.

Advertisement

More From Market Realist