Steel Stock Falls Near Buy Point On Profit Warning


Steelmaker Nucor (NUE) warned on profits amid declining volumes at its steel mills, a day after steel stocks rallied to defy a broad market sell-off. Nucor stock dropped in early trade Wednesday.

Nucor management targeted fourth-quarter earnings of $7.65-$7.75 per share. That would mark a record quarter, up from $7.28 in the third quarter and, at the midpoint, a year-over-year gain of more than 490%. But analysts on Wall Street were on average expecting $8.18, according to FactSet.

Earnings in Nucor’s steel mills segment remain robust and should be comparable to Q3 “despite lower volumes caused by year-end seasonality,” Nucor said in a statement.

The new language Wednesday marked a downshift from Oct. 21. Nucor management said then it expects steel mill segment profit to “improve” in Q4 vs. Q3, driven by additional earnings growth at its sheet and plate mills. The steel mill segment generated 67% of total company revenue, and 86% of total profit (before eliminations), in the third quarter.

Nucor continues to expect earnings to increase in its steel products unit, according to Wednesday’s statement. And it continues to forecast that earnings will fall in the raw materials segment vs. Q3 due to margin compression at Nucor’s direct reduced iron facilities.

“Demand continues to be strong in most of the end markets we serve,” Nucor said Wednesday. “We are confident that 2022 will be another year of strong profitability.”

The company did not offer specific Q4 EPS guidance during its most recent earnings report, on Oct. 21.

Nucor Stock, Steel Stocks

Shares of Nucor fell 3.3% to 114.51 early on the stock market today. Nucor stock rose 2.5% Tuesday to briefly retake a 122.16 cup-with-handle buy point, but closed below the entry. Among other steel stocks, United States Steel (X) dropped 3.2%, Cleveland-Cliffs (CLF) dived 4.9% and Steel Dynamics (STLD) lost 4%.

Steel stocks went on a tear over the summer. Investors bet on the pandemic headwinds easing and on higher U.S. infrastructure spending under President Joe Biden.

In September, Nucor announced plans for a $100 million expansion of a bar mill, adding 600,000 tons of capacity. Nucor also said it would build a $2.7 billion sheet mill with a capacity of 3 million tons.

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