Will Lower Steel Prices Weigh on Nucor's Earnings in Q3?

Nucor Corporation NUE is set to release third-quarter 2024 results after the closing bell on Oct. 21.

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The U.S. steel giant surpassed the Zacks Consensus Estimate in three of the trailing four quarters while missing once. NUE has a trailing four-quarter earnings surprise of 7.6%, on average. It posted an earnings surprise of 16% in the last reported quarter. Lower earnings in the steel mills segment on weaker selling prices are likely to have hurt NUE’s third-quarter results.

Nucor’s shares are up 1.4% over a year, compared with the Steel Producer industry’s 3% decline.

 

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Let’s see how things are shaping up for this announcement.

What do NUE’s Earnings Estimates Say?

Nucor anticipates third-quarter adjusted earnings in the range of $1.30-$1.40 per share.

The Zacks Consensus Estimate for third-quarter consolidated revenues for Nucor is currently pegged at $7,204.5 million, reflecting a year-over-year decline of 17.9%.

Factors at Play for NUE Stock

Lower profitability in the steel mills segment is expected to have weighed on Nucor’s performance in the quarter to be reported. NUE, last month, said that it expects a decline in earnings in the third quarter, excluding one-time charges related to the impairment of certain non-current assets, due to lower earnings in the steel mills segment, stemming from reduced average selling prices.

The steel products segment is also expected to report lower earnings due to reduced prices and volumes. The raw materials segment is forecast to see a decline in earnings compared with the prior quarter.

U.S. steel prices have seen a sharp decline this year due to a slowdown in end-market demand after a strong run in late 2023 that extended into early 2024. The benchmark hot-rolled coil (HRC) prices are down more than 40% since reaching $1,200 per short ton at the start of 2024. The downside has been influenced by a concoction of factors, including a pullback in steel mill lead times, an oversupply of steel exacerbated by increased imports, reduced demand from key industries and economic uncertainties. 

Sluggish industrial production and construction activities also contributed to the decline. While the recent steel mill price hikes have led to a modest uptick in HRC prices, a significant recovery is not expected over the near term given the weak manufacturing backdrop and demand weakness. Prices are currently hovering around the $700 per short ton level. Lower average selling prices are likely to have hurt NUE’s sales and margins in the quarter to be reported.

Our estimate for third-quarter average sales price per ton for the company’s steel mills unit stands at $962, suggesting a 13.6% year-over-year decrease and an 8.5% sequential decline. The same for total sales tons to outside customers for steel mills is pegged at 4,446,000 tons for the third quarter, suggesting a 3.7% decline from the prior quarter and a 2.9% year-over-year decrease.

What Our Model Unveils for NUE Stock

Our proven model does not conclusively predict an earnings beat for Nucor this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here.

Earnings ESP: Earnings ESP for Nucor is 0.00%. The Zacks Consensus Estimate for earnings for the third quarter is currently pegged at $1.40. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: NUE currently carries a Zacks Rank #4 (Sell).

Basic Materials Stocks That Warrant a Look

Here are some companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Agnico Eagle Mines Limited AEM, scheduled to release earnings on Oct. 30, has an Earnings ESP of +4.38% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The consensus estimate for AEM’s earnings for the third quarter is currently pegged at 96 cents.

CF Industries Holdings, Inc. CF, slated to release earnings on Oct. 30, has an Earnings ESP of +10.58% and carries a Zacks Rank #1 at present.

The consensus mark for CF’s third-quarter earnings is currently pegged at $1.04.

Kinross Gold Corporation KGC, scheduled to release third-quarter earnings on Nov. 5, has an Earnings ESP of +13.92%.

The Zacks Consensus Estimate for Kinross Gold's earnings for the third quarter is currently pegged at 16 cents. KGC currently carries a Zacks Rank #3.

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Nucor Corporation (NUE): Free Stock Analysis Report
 
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