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Stocks of Nucor Plunge After Profit Warning

September 17, 2023
minute read

Shares of Nucor Corp. experienced a decline as the steelmaker issued a warning to investors regarding its earnings performance for the current quarter, falling short of expectations.

Nucor's stock (NUE, -6.11%) witnessed a decrease of 5.5% during afternoon trading, indicating a potential closure at a three-month low. The stock ranked among the worst performers in the S&P 500 index on that particular Friday, and its downturn had a spillover effect, adversely impacting the shares of rival steelmakers.

In a statement released late Thursday, the company explained, "We anticipate a decline in earnings for the steel mills segment in the third quarter of 2023 compared to the second quarter of 2023, primarily attributed to lower pricing, and to a lesser extent, reduced volumes. The most significant impact on earnings is expected within our sheet mills."

During the company's conference call in July, following the release of second-quarter results, Nucor had already indicated that steel mill earnings were expected to decline in the third quarter, as lower profit margins offset the "stable" shipments.

Nucor anticipates third-quarter earnings per share to range between $4.10 and $4.20, a figure below the EPS of $5.81 recorded in the preceding second quarter and a notable drop from the EPS of $6.50 registered in the third quarter of the previous year.

The current FactSet EPS consensus stands at $4.43, which reflects a downward revision from the EPS consensus of $4.61 noted at the end of August.

Nucor is expected to release its third-quarter financial results in late October.

The profit warning issued by Nucor also exerted downward pressure on the stock prices of its industry peers. Shares of Steel Dynamics Inc. (STLD, -3.73%) recorded a 2.9% decline, while U.S. Steel Corp.'s stock (X, -0.52%) witnessed a 0.4% dip.

J.P. Morgan analyst William Peterson maintained his underweight rating on Nucor's stock, citing concerns about the outlook for the fourth quarter. He acknowledged Nucor's standing as one of the highest-quality companies in the steel sector but expressed bearish sentiments, primarily linked to weakness in its largest end market, nonresidential.

"As we move into the fourth quarter, we anticipate further downward momentum in sheet pricing," Peterson noted in a communication to clients, emphasizing that market pricing is largely contingent on the duration of the United Auto Workers' strike against the Big 3 automakers. It's worth noting that the automotive sector represents one of Nucor's key customer segments.

Over the past three months, Nucor's stock has recorded a gain of 3.5%, while the S&P 500 index exhibited a more modest increase of 0.65%.

Adan Harris
Managing Editor
Eric Ng
John Liu
Editorial Board
Bryan Curtis
Adan Harris
Managing Editor
Cathy Hills
Associate Editor

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