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Steel Stocks See Some Relief as Nucor Beats Q1 Estimates

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Nucor

On April 23, Nucor (NUE), the largest US-based steel producer, released its first-quarter earnings results. The company reported revenue of $6.1 billion compared to $6.3 billion in the fourth quarter and $5.6 billion in the first quarter of 2018. Its revenue was largely in line with analysts’ consensus estimate.

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However, Nucor managed to beat analysts’ consensus earnings estimate in the quarter. It reported EPS of $1.63 in the period compared to its EPS of $2.07 in the fourth quarter and $1.10 in the first quarter of 2018. Analysts had expected Nucor to post EPS of $1.50 in the quarter. Last month, Nucor said that it expected its first-quarter EPS to be between $1.45 and $1.50.

Steel companies

Nucor’s earnings beat is a welcome break for steel investors. On April 22, Steel Dynamics (STLD) posted worse-than-expected earnings, and its stock tumbled almost 5.0%. U.S. Steel Corporation (X) and AK Steel (AKS) also saw falls of 1.9% and 0.82%, respectively, yesterday. U.S. Steel is now negative for the year. Some brokerages have raised concerns over rising US steel production capacity and have flagged U.S. Steel’s weak competitive position and expected cash burn.

Key highlights

Nucor’s average steel selling price fell 4% sequentially, and its shipments to outside customers rose 1% sequentially in the first quarter. However, Nucor’s outside shipments fell 3% year-over-year in the same period. Nucor’s average scrap and scrap substitute costs fell 2% sequentially. As the fall in its average selling price exceeded the fall in its scrap costs, the company saw margin compression in the quarter. Steel Dynamics also saw margin erosion in the first quarter for the same reason.

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