This Steel Producer is an Earnings Magnet

Shaping up Nicely

In recent years, the steel industry has faced significant challenges. These include global overcapacity, trade tensions, supply chain issues, and an economic slowdown in response to the pandemic. However, during even the most difficult economy for building materials, Nucor, the largest steel maker in North America, has prospered from its diverse business sectors. These sectors include steel production and steel product manufacturing.

Forging Ahead

Nucor CEO Leon Topalian recently said on CNBC, “We’re touching every sector of the economy from automotive to Ag to energy to all the megatrends, we’re moving our company and positioning us for higher highs.” One might not expect the company responsible for 25% of all Steel produced in the US to continue to grow at a rapid pace, but its winning strategy of capitalizing on economic factors, has provided the company with the top three years in its history (2021-2023), and the trajectory is still strong.

One factor is the recovery of the global economy after the worldwide response to Covid-19. The delayed construction activities have since gotten underway. But this is just one positive development for the company. Mr. Topalian said Nucor benefits from several government initiatives that boost demand for steel and incentivize domestic manufacturing. He pointed to the Biden administration’s $1 trillion infrastructure bill as well as a bill to encourage U.S. semiconductor production – this means additional business for Nucor as chip makers develop new plants on US soil.

Out of the eight analysts that cover Nucor, only one rank it as a sell and two rank it as a hold. Alexander Hacking, a Wall Street analyst from Citi upgraded the stock on March 13 and has a $249 price target has a $240 price target or 27% upside. UBS initiated coverage in January and retains a price target of $210. (See Nucor Stock Forecast)

Solid Investment

As investors look to rework their portfolios to reduce exposure to tech-heavy indexed investments, steel is shaping up to be a strong diversifier. Nucor is a leading producer in the US with a business model that excels from its highly diversified manufacturing units.

TipRanks gathers views from analysts and experts from all the major financial centers, it then crunches the data and presents it in a nice easy-to-decipher format.

Consider adding the steel producer Nucor (NYSE:NUE) to your investment mix for a well-rounded strategy. Nucor is a prominent player in the steel industry and focuses in the low-tech sector. Operating in the low-tech sector means the company focuses on using conventional technologies over newer innovations. This strategic approach suggests the company’s commitment to stability and consistent performance for investors seeking long-term growth in their portfolios. Diversifying your portfolio with such companies can mitigate over-dependence on major tech stocks, especially in anticipation of potential tech market declines in 2024.

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Robust Performance in Challenging Times

In recent years, the steel industry has faced significant challenges. These include global overcapacity, trade tensions, supply chain issues, and an economic slowdown in response to the pandemic. However, during even the most difficult times for building material sales, Nucor, the largest steel maker in North America, has benefitted from its diverse business units. These businesses include steel production and steel manufacturing divisions.

One might not expect a company responsible for 25% of all Steel produced in the U.S. to continue to grow at a rapid pace. Yet, its winning strategy of capitalizing on fulfilling the needs of a diverse list of industries allows Nucor to brag that it just experienced three years of earnings (2021-2023) that surpass all of the previous 20 years combined. And, the trajectory is still strong.

Nucor’s Strategy

Nucor CEO Leon Topalian was a recent guest on CNBC, he described how the company strategy was to push forward in as many economic sectors as possible. The CEO listed automotive, agriculture, energy, and “all the megatrends.” Nucor is positioning its company for even higher highs.

The ongoing global economic rebound post-Covid-19 has spurred increased manufacturing and construction activity, providing Nucor with new growth opportunities. Topalian highlighted how Nucor is benefitting from government initiatives driving steel demand and promoting domestic manufacturing. He specifically cited the Biden administration’s $1 trillion infrastructure bill and a related legislation supporting U.S. semiconductor production. These initiatives translate into new business opportunities for Nucor as chip manufacturers establish new facilities in the U.S.

Is Nucor a Buy?

Out of the eight analysts that cover Nucor (NYSE:NUE), only one ranks the steelmaker as a Sell, and two rank NUE as a Hold. Alexander Hacking, a Wall Street analyst from Citi upgraded the stock on March 13 and issued a $240 price target, which suggests 27% upside potential. The average NUE price target is $196.75, suggesting an upside potential of 4.39%.

Will Nucor Earnings Keep Rising?

Nucor Steel plans to release its earnings after the markets close on Monday, April 22, 2024. Guidance from the company last week indicates a sharp increase in earnings over the last quarter.

For investors adjusting their portfolios to reduce exposure to tech-heavy indexed investments, the company appears to be a solid diversifier. As a leading steel producer and manufacturer in the U.S., Nucor has a business model that excels due to its highly diversified manufacturing units.

TipRanks gathers views and ratings from the top financial analysts in the industry. It then helps investors make more informed investment decisions by presenting the data in an easy-to-understand format.