Nucor beats earnings estimates

Posted Jul 29th 2008 4:55PM by Guest blogger
Filed under: Nucor Corp (NUE)

By Alex Kolb, Zack's Investment Research

Nucor Corporation (NYSE: NUE) recently reported record second-quarter earnings of $1.94 per share, beating the consensus estimate by nearly 8% and topping the year-prior $1.14. Consolidated net sales of $7.09 billion also reached a record level, exceeding last year's $4.17 billion. For income, the company is yielding 2.3%, which well ahead of the industry average.

Company Description

Nucor and its affiliates, which make the most steel in America, manufacture steel products. The company's operating facilities are primarily in the U.S. and Canada. Nucor also brokers ferrous and nonferrous metals, pig iron and HBI/DRI; supplies ferro-alloys; and processes ferrous and nonferrous scrap. The company is also North America's largest recycler.

A Record Quarter Translates into Solid Growth

The steel maker recently announced record results in the second quarter. Earnings of $1.94 per share, beat the consensus estimate by nearly 8% and topped the year-prior $1.14. Consolidated net sales of $7.09 billion also reached a record level, exceeding last year's $4.17 billion.

The company said it expects a strong third quarter, with earnings ranging from $1.80 to $1.85 per share. Nucor added that it expects continued strength in its sheet, plate, beam and bar businesses due to the solid global demand for steel. The company does expect its downstream businesses to be challenged by rising steel prices, but noted that it still expects continued good results from this segment.

While NUE's quarterly results reflect strong growth, the aforementioned earnings guidance is below Wall Street expectations and caused a share price set back. However, fundamentals still look positive for the long-term as evidenced by the bullish Street projections for the full year.

More specifically, for the full year, forecasts of $7.16 per share advanced from last week's $7.10 and last month's $6.95. Third-quarter analyst estimates of $1.91 per share are a bit off last month's $1.93 but above the two months-ago level of $1.88.

Other Signs of Growth

The company offers a return on equity (ROE) of 30%, eclipsing the industry average of 20%. Its net margin of 8.4% is higher than the industry average of 7.1%.

Rewarding Income

In addition to growth, Nucor boasts a hefty dividend yield in comparison to its industry group. The company's yield of 2.3% is a rewarding one among its peers as most companies within its industry pay no dividend.

The company noted in its second-quarter report that, in June, it declared a supplemental dividend of 20 cents per share in addition to the 32 cents base dividend. The total dividend of 52 cents per share is payable on August 11, 2008 to stockholders of record on June 30, 2008. Nucor stated that it began paying a supplemental dividend in the second quarter of 2005, allowing stockholders to participate in its successful pay-for-performance business model.

Tags: nucor, steel