• Nucor is slated to release its second-quarter earnings on July 18.
  • Nucor released its second-quarter guidance last month, which disappointed markets.

Nucor’s second-quarter earnings

Nucor (NUE), the largest US-based steel producer, is scheduled to release its second-quarter earnings on Thursday. The company has seen an upwards price action of 7.4% year-to-date based on its closing prices on Monday. The stock hit its 52-week low in May and tracked the weakness in the steel space. However, the stock bounced back from those lows.

What to Expect From Nucor’s Q2 Earnings This Week

Earnings estimates

The analysts polled by Thomson Reuters expect Nucor to post revenues of $6.0 billion in the second quarter. The company posted revenues of $6.1 billion in the first quarter and $6.5 billion in the second quarter of 2018. Steel companies’ revenues are a function of steel shipments and average steel selling prices. Nucor expects its second-quarter shipments to be similar to the first quarter. However, US steel prices have fallen this year. Falling spot steel prices are expected to take a toll on Nucor’s average steel selling prices. Nucor’s revenue estimates look high considering the sharp fall in spot steel prices.

US steel companies, that were aggressively expanding as early as the first quarter, are adjusting their production levels. Last month, U.S. Steel Corporation announced the closure of two blast furnaces in the US. Domestic steel mills announced a price hike almost immediately after the announcement.

Nucor’s guidance

Nucor is expected to post an EPS of $1.38 in the second quarter. In contrast, the company posted an EPS of $1.63 in the first quarter and $2.13 in the second quarter of 2018. Last month, Nucor said that it expects to post an EPS of $1.20–$1.25 in the second quarter. The company expects its Steel Mills and Raw Materials segment’s performance to fall on a quarterly basis in the second quarter. However, the Steel Products segment, which produces downstream fabricated products, is expected to post a sequential rise in its earnings in the second quarter.

Nucor’s second-quarter earnings guidance disappointed markets. While analysts’ second-quarter estimates are higher compared to Nucor’s guidance, Nucor provided conservative guidance in the past. Although Nucor’s guidance was below the expectations in the first quarter, it posted better-than-expected earnings.

Nucor’s second-quarter earnings call

During the second-quarter earnings call, markets would watch what Nucor’s management has to say about US steel markets. While US steel companies have announced two rounds of price hikes, the steel market is weak at home and abroad. We’ll have to see how Nucor proceeded with its buybacks in the second quarter. Last year, the company approved a $2 billion buyback plan. In the first quarter, Nucor only repurchased $73 million of its stock. Nucor stock hit a 52-week in May. The company might have expedited its buyback program to take advantage of a lower stock price.

Markets would watch Nucor’s commentary on capital allocation. Amid concerns about rising domestic supply, US steel companies might not announce more big projects now. During the first-quarter earnings call, Nucor talked about its disciplined capital allocation. However, we’ve seen oversupply concerns crop up amid domestic steel companies’ capacity additions.

Section 232 exemptions

President Trump granted Section 232 exemptions to Canada and Mexico. US steel prices, which were under pressure this year, fell even more. Canada and Mexico are the leading steel exporters to the US. During the second-quarter earnings call, Nucor might offer insights into how the exemption for Canada and Mexico could impact the US steel industry in general and Nucor in particular.

In what could be a respite for Nucor and other steel producers, President Trump might increase the content of domestically produced steel in federal projects. Read US Steel Companies Might Get Another Lifeline from Trump to learn how the move could impact the domestic steel industry.

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