Stocks of Nucor Plunge After Profit Warning

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.

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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.

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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."

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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.

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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.

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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.

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

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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.

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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.

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"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.

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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%.

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