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.
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.
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