On June 17, Nucor (NUE), the largest US-based steel producer, released its second-quarter earnings guidance. The company expects to post EPS of $1.20–$1.25 in the quarter. In contrast, it posted EPS of $1.63 in the first quarter and $2.13 in the second quarter of 2018.
Nucor expects the performance of its Steel Mills and Raw Materials segment to fall on a sequential basis in the second quarter. However, its Steel Products segment, which produces downstream fabricated products, is expected to post a sequential rise in its earnings in the quarter.
The expected fall in Nucor’s earnings isn’t surprising given the steep fall in US steel prices. Other steel companies such as Steel Dynamics (STLD) and U.S. Steel Corporation (X) are also expected to post yearly falls in their second-quarter earnings. We should get Steel Dynamics’ and U.S. Steel’s second-quarter earnings guidance shortly. Incidentally, U.S. Steel shifted from annual guidance to quarterly guidance earlier this year.
Stock lagging peers today
Meanwhile, Nucor is trading with a loss today even as its peers, such as U.S. Steel and Steel Dynamics, are in the green. This underperformance could be attributed to Nucor’s dismal guidance. Analysts polled by Thomson Reuters expected Nucor to post EPS of $1.51 in the second quarter. Nucor’s earnings guidance fell short of analysts’ estimates. Its earnings guidance fell short of analysts’ estimates in the first quarter also.
Steel stocks have pared their 2019 gains amid falling spot steel prices. However, US steel prices should stabilize at these levels. While US steel stocks look to have bottomed, we could see more downside if China’s slowdown worsens. Metals are especially prone to China’s slowdown given the country’s dominant share in global metal demand. US steel stocks fell sharply in May and hit their 52-week lows. Read Which Steel Stocks Look Interesting after the Fall? for more analysis.