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Nucor (NUE) Poised on Acquisitions, Expansion Actions

On Aug 14, we issued an updated research report on steel maker, Nucor Corporation NUE.

Nucor saw a year-over-year increase in revenues and net earnings in second-quarter 2017. However, both earnings and sales missed the respective Zacks Consensus Estimate.

Nucor sees earnings in third-quarter 2017 to be in a band similar to the quarterly results of first-half 2017. The company continues to achieve greater penetration of the automotive market and expects to continue this trend for the rest of 2017. Nucor is also upbeat about improving prospects in the energy markets.

Nucor, which is among the prominent U.S. steel makers along with U.S. Steel X, AK Steel AKS and Steel Dynamics STLD, has been focusing on growth through strategic acquisitions and it is well positioned to gain from such efforts to expand business through mergers and acquisitions.

Nucor, in early 2017, wrapped up its purchase of steel electrical conduit maker, Republic Conduit, from Luxembourg-based Tenaris S.A. for $335 million. The acquisition is expected to make the Nucor a market leader in steel electrical conduits. Moreover, the company acquired Southland Tube for $130 million in Jan 2017. The buyout strengthens Nucor’s foothold in the hollow structural section (“HSS”) steel tubing maker.

Moreover, the purchase of the assets of open web steel joists maker, Omega Joist also allows Nucor to grow its joist and decking business in Canada. The recently announced acquisition of St. Louis-based steel bar maker, St. Louis Cold Drawn, Inc. is also in sync with Nucor's strategy to expand its position as the market leader in cold finished bar products and complements its goal to profitably grow its value-added product portfolio.

Nucor should also gain from continued momentum in the automotive market. The company remains focused on achieving greater penetration of this major market. The company has entered into a joint venture with JFE Steel Corporation of Japan to build and operate a plant in Mexico that will supply sheet steel to the country’s growing automotive market. Construction of the plant, which will have the capacity to produce 400,000 tons annually, started in June.

Nucor, in May, also announced that it will build a hot band galvanizing line at its sheet mill in Kentucky, that will serve its objective of growing share in the automotive market. The $176 million project is expected to expand the product capabilities of Nucor Steel Gallatin and the new line will have an annual capacity of 500,000 tons.

However, the steel industry is still not out of the woods yet. The industry is still under relentless pressure caused by years of excess steel-making capacity. The U.S. steel industry also continues to be hit by cheaper imports. Finished steel imports from foreign producers have increased about 15% year over year during the first half of 2017.

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