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Citi Sees Little Upside In Nucor

Nucor Corporation NYSE:NUE - Citi Sees Little Upside In Nucor

Citi’s Alexander Hacking noted Nucor Corporation NUE has “consistently generated industry leading ROIC over the business cycle while growing production capacity and adding more value added product offerings.”

Hacking initiated coverage of the company with a Neutral rating and price target of $55.

The Positives

Due to its consistent above average ROIC, the company has traded at a premium to the rest of the industry.

“NUE is the North American market leader in nearly every long steel product and many fabricated products, and also the third largest producer of sheet steel,” the analyst mentioned.

Hacking also pointed out that Nucor is the only steel producer in North America with an investment grade rating of (A-), as well as sufficient cash and liquidity to continue to invest in improving its earnings power, which is the company’s top capital allocation priority.


However, since ROIC, the company’s ROIC gas averaged only 5.3 percent, driven by declining operating margins and meaningful investments in the raw material segment that are yet to pay off.

“We expect some improvement in the Raw Materials segment but it will likely still under earing its cost of capital over the next several years,” Hacking stated.


In addition, Nucor has a solid history of growing dividends, which has supported the shares. However, with payout ratios of more than 80 percent, the analyst believes there is little room for any significant increases in the medium term.

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Jul 2016BerenbergDowngradesBuyHold
Jul 2016BerenbergDowngradesBuyHold
Jul 2016Bank of AmericaDowngradesBuyNeutral

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