U.S. steel company
Nucor
provided disappointing fourth-quarter guidance. Shares were relatively stable after the announcement, however, because investors only care about what’s next.
On Thursday, Nucor said earnings for the fourth quarter should fall between $2.75 to $2.85 a share. Things are going in the wrong direction: Nucor reported net earnings of $4.57 per diluted share in the third quarter of 2023 and $4.89 per diluted share in the 2022 fourth quarter.
The range, however, isn’t a big disappointment—Wall Street expected a decline. Analysts were projecting $3.19 a share for the fourth quarter.
Benchmark steel prices started out the quarter at less than $800 a ton. They are about $1,100 a ton now. They averaged about $800 in the third quarter.
Higher steel prices should mean higher earnings, but there is often a lag between spot prices and the pricing Nucor customers receive. What’s more, while steel prices matter for Nucor, so do prices for scrap steel, Nucor’s key raw material.
Benchmark scrap steel prices averaged roughly $340 a ton in the third quarter. They are up to about $360 a ton today.
Nucor stock was up 1.2% while the
S&P 500
and
Dow Jones Industrial Average
futures were both up about 0.3%.
Nucor shares typically trade on expectations for steel prices and the spread over Nucor’s raw materials. Things have been relatively stable lately and shares are flat over the past three months. Over the past 12 months, the stock has gained about 13% as Nucor’s earnings estimates for 2024 have gone from about $10 a share to $12.60 a share during that span.
Nucor stock is trading for about 13 times estimated 2024 earnings, right in the middle of its five-year range. Steel stocks typically trade for low multiples of earnings when things are good and high multiples when things are bad. That is typical for cyclical stocks.
Nucor has traded for as low as 5 times estimated next year’s earnings and as high as 21 times over the past five years.
Write to Al Root at [email protected]
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