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Nucor: Analysts’ Views amid High Steel Prices

Mohit Oberoi, CFA - Author

Aug. 18 2020, Updated 5:28 a.m. ET


Nucor (NUE) has received a “strong buy” rating from four analysts, while seven analysts have a “buy” or some equivalent rating on the stock. The remaining five analysts polled by Thomson Reuters on June 8 rate Nucor as a “hold.” The stock carries a mean consensus target price of $76.25, which represents 14.0% upside over its closing price on June 8. So far, Nucor has gained 5.8% in 2018. In comparison, U.S. Steel Corporation (X) has gained 5.9%, while AK Steel (AKS) has fallen 17.0% for the year.

Looking at the recent rating changes, on May 17, Macquarie upgraded Nucor from “neutral” to “outperform.”

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Second-quarter earnings

Nucor posted better-than-expected earnings in the first quarter. The company expects its earnings to rise more in the second quarter. US spot hot-rolled coil prices are at a decade high, while scrap prices have been largely stable. A combination of higher steel prices and stable scrap prices should lead to margin expansion for US steel companies in the second quarter and beyond. Steel companies (XME) like Nucor and Steel Dynamics (STLD) should benefit from lower scrap prices. Steel scrap is the major input for these companies.

Nucor is investing to expand its capacity in long and flat steel products. The company has also looked at inorganic growth to expand its product portfolio in the downstream space. So far, these investments haven’t impressed markets, which is reflected in the stock’s recent price action.

Next, we’ll see how analysts rate Steel Dynamics.


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