Infrastructure plans

Investment in the infrastructure sector was one of President Donald Trump’s key pre-election platforms. However, so far, we haven’t seen much traction on that front.

Higher infrastructure investments support demand for materials such as steel and cement. Nucor (NUE) has sizable exposure to the infrastructure space. The company is the largest rebar (reinforcing bar) supplier in the United States (SPY). The product is used in the nonresidential construction industry. Nucor has announced new rebar mills to further bolster its geographical presence. In the steel space, Nucor could be among the biggest beneficiaries of Trump’s infrastructure plans if they materialize.

US Steelmakers Await President Trump’s Infrastructure Plans

Analysts’ recommendations

Nucor has received “buy” or higher ratings from 12 analysts, while three have given it “holds” or equivalents. Nucor doesn’t have any “sell” ratings, and its mean consensus price target of $78.12 represents a potential upside of 22.8% over its September 5 closing price. U.S. Steel Corporation (X) and AK Steel (AKS) are trading 50.4% and 19.8% below their consensus price targets, respectively.

Share buybacks

Earlier this week, Steel Dynamics (STLD) announced a $750 million share buyback program. Nucor also has a strong balance sheet and could potentially look at a share buyback as markets overlook steel companies’ strong earnings.

To be sure, Nucor posted its best second-quarter earnings in the second quarter of 2018. Steel companies’ valuations have also been subdued this year amid Section 232 tariff uncertainty and concerns about China’s economy.

In the next and final article, we’ll look at Steel Dynamics’ ratings and target prices.

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