uploads///architecture _

What’s in Store for Nucor after a Tepid Start to the Year?

By

Mar. 6 2018, Published 5:23 p.m. ET

Nucor

Nucor (NUE), the largest US-based steel producer and the 12th largest in the world based on 2016 tonnage, is having a tepid 2018. Although the stock has gained 6.7% year-to-date (or YTD) based on March 2 closing prices, the returns lag some of the other US steel producers (XME). U.S. Steel (X) has gained 28.9%, while Steel Dynamics (STLD) is up 12.0% YTD. AK Steel (AKS) is trading on par with last year’s closing stock price.

Article continues below advertisement

Price action

It would not be prudent to compare Nucor’s price action to U.S. Steel. U.S. Steel has high operating leverage owing to its blast furnaces, and its earnings sensitivity to spot steel prices is higher as compared to Nucor. Steel Dynamics is Nucor’s closest US-based peer. However, Nucor has underperformed Steel Dynamics for the last couple of years. 2018 looks no different, and Nucor continues to underperform Steel Dynamics.

Series overview

President Trump looks set to impose steep duties on steel imports. The Commerce Department under the Section 232 investigation gave three options to President Trump. The most stringent option called for a global tariff of 24%. President Trump is looking at a tariff of 25% on all steel imports and a 10% tariff on aluminum imports.

Meanwhile, despite a positive outcome from the Section 232 investigation, Nucor’s 2018 price action has lagged some of the other steel companies. In this article, we’ll explore whether Nucor could possibly catch up to other steel companies. Let’s begin by looking at Nucor’s valuation multiples in the next article.

Advertisement

More From Market Realist

    • CONNECT with Market Realist
    • Link to Facebook
    • Link to Twitter
    • Link to Instagram
    • Link to Email Subscribe
    Market Realist Logo
    Do Not Sell My Personal Information

    © Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.