Nucor Corporation (NUE), one of North America’s leading and diversified steel and steel products firms, has seen a year-to-date share gain of 18.7% despite market volatility.
However, given the cyclical nature of the steel industry and its susceptibility to overall market conditions, Nucor’s near-term trajectory looks uncertain.
In an interview with CNBC, Leon Topalian, Nucor’s CEO, highlighted the ongoing problem of oversupply within the sector. He underscored the importance of advocating for efforts to prevent steel dumping.
In addition, NUE launched lower-than-expected guidance for its third quarter ending September 30, 2023, and expects earnings for the steel mills segment to decline as compared to the second quarter of 2023, primarily due to lower pricing and, to a lesser extent, volumes.
Furthermore, Topalian hinted at the latter half of the year being comparatively “softer” than the first half. Considering these factors, this may not be the right time to invest in Nucor’s stock. Let’s delve into some critical metrics to get a deeper understanding.
Analyzing Nucor Corporation’s Growth, Fluctuations, and Market Stability (2020-2023)
The trending and fluctuation of NUE’s trailing-12-month net income reflect significant growth and volatility over time. Here are key observations:
- As of December 31, 2020, the net income was $721.47 million.
- A notable surge occurred leading up to April 03, 2021, with the net income reaching $1.64 billion, an increase from the previous figure.
- From April 2021 until October 2022, there was a consistent upward progression. The net income peaked at $9.035 billion by July 02, 2022.
- However, a downward trend began in October 2022, with the net income decreasing to $8.60 billion.
- This downswing continued, and by the end of 2022 (December 31, 2022), the net income had further reduced to $7.60 billion.
- The decline persisted into 2023, bringing the net income down to $5.54 billion by July 01, 2023.
In terms of growth, comparing the first value ($721.47 million) to the last one ($5.54 billion), we see substantial overall growth despite the recent decline.
The series under review represents the Gross Margin of NUE, for staggered dates from December 31, 2020, to July 1, 2023.
- On December 31, 2020, NUE had a Gross Margin of 11.10%.
- Within the next quarter (April 3, 2021), there was an increase in Gross Margin to 15.00%.
- The Gross Margin saw a continual upward trajectory, reaching as high as 20.50% on July 3, 2021, and 26.20% by October 2, 2021.
- This trend continued into the following year, with significant growth to 30.20% by the end of December 2021 and peaking at 33.70% on July 2, 2022.
- However, a slight decrease was noticed on October 1, 2022, with the Gross Margin dropping to 32.30%.
- This downward trend persisted; by year-end (December 31, 2022), the Gross Margin decreased further to 30.10%.
- Lastly, there was a continued reduction, falling to 27.80% on April 1, 2023, and 25.20% by July 1, 2023.
Overall, this data paints a picture of fluctuation. The trend shows that over the span of about three years, NUE’s Gross Margin started out at 11.10%, rose significantly, and then started to taper off again. Despite recent decreases, from initial examination, there has been a growth rate of approximately 14.10% when comparing the last value (July 1, 2023) with the first value (December 31, 2020). More emphasis is placed on the more recent data, which shows a majority decline in the Gross Margin of Nucor Corporation.
The Return on Assets (ROA) of NUE presents an overall upward trajectory from December 2020 to July 2022, with the ROA value increasing from 0.038 to 0.325, representing a substantial growth rate of approximately 755%. This trend underscores an enhancement in the efficiency of asset utilization within NUE over this period. Post-July 2022, however, there is a visible decline in Nue’s ROA. The value dropped from a peak of 0.325 in July 2022 to 0.244 by the end of that year and then further decreased to 0.17 by July 2023. This depreciation of the ROA might suggest lowered profitability from the company’s assets. The key points are as follows:
- A steep rise in ROA from 0.038 in December 2020 to 0.325 in July 2022.
- The growth rate over this period was about 755%.
- From July 2022 onwards, a descending trend is observed.
- The ROA decreased to 0.244 by December 2022 and declined to 0.17 by July 2023.The last measured value in the series is 0.17 for July 2023 represents a sharp decline compared to previous values.
Emphasizing more recent records and the last value suggests that, after a significant growth phase, Nue is experiencing a downturn in its ROA. This shift could raise important questions about asset management and profitability strategies within the organization moving forward.
The current ratio of NUE has experienced several fluctuations over the past three years. Overall, recent trends suggest a gradual recovery and an upward trend.
- From December 2020 to April 2021, the Current Ratio dropped from 3.61 to 3.50, representing a slight decrease.
- In July 2021, the ratio decreased further to 3.11 and continued on this downward trend, reaching its lowest point in December 2021 at 2.48.
- The start of 2022 saw an increase in the Current Ratio to 2.88 in April, but it fell slightly to 2.62 by July.
- However, there was an upward trend starting from October 2022, with the rate rising from 3.10 in October to 3.39 by December.
- This growth trend has continued into 2023, with the ratio reaching 3.74 in April and peaking at 3.82 by July 2023.
Overall, comparing the initial value of 3.61 in December 2020 with the latest value of 3.82 in July 2023, there’s been a growth rate of about 5.8% over the period. However, the substantial fluctuation throughout indicates a degree of volatility in Nucor Corporation’s Current Ratio.
The Asset Turnover for NUE has revealed an interesting trend and noteworthy fluctuations throughout the given time period from December 2020 to July 2023. Here are some key points observed:
- The initial value of Asset Turnover was 1.06 on December 31, 2020.
- There was a general upward trend, peaking at 1.56 in April 2022. This means Nucor Corporation was able to use its assets effectively to generate sales during this time.
- Sudden declines were noted in October 2021 and October 2022, falling to 1.46 and then 1.33, respectively.
- The most recent data available from July 2023 report an Asset Turnover of 1.15.
- A decrease of 34% is observed when comparing the first (December 2020) and last (July 2023) recorded values, reflecting a slowdown in the company’s efficiency in utilizing its assets to generate revenue.
The overall fluctuation in values indicates that Nucor Corporation’s Asset Turnover has experienced some variability due to multiple potential factors, such as changes in sales or strategies related to how the assets are used. These numbers should be interpreted considering external market conditions.
Analysis of Nucor Corporation’s Share Price Fluctuations from April to October 2023
The share prices of NUE demonstrate noticeable shifts over the analyzed period from April to October of 2023.
- On April 14, 2023, the stock was valued at $147.75.
- The price went up slightly to $150.83 on April 21, 2023, but subsequently declined to $144.87 by May 5, 2023.
- A decelerating trend was observed in May as prices fell from $139.04 on May 12, 2023, to $135.16 on June 2, 2023.
- The stock then began an accelerating upward trend in June, rising from $144.88 on June 9, 2023, to a peak value of $162.29 on July 7, 2023.
- The growth rate remained somewhat steady through July, with minor fluctuations and the stock reaching an apex of $171.32 by August 4, 2023.
- Then, a modest decline was noted until the end of August, with the lowest point of the month being at $166.96 on August 25, 2023.
- Another increase was recorded by September 1, 2023, as the price adjusted to $170.51. Unfortunately, this was followed by a significant downward trend that brought the price down to $155.11 on September 22.
- The price seemed to stabilize towards the end of September and into early October, remaining around the $155.50 mark as of October 5, 2023.
Overall, while Nucor Corporation’s shares displayed some fluctuations throughout 2023, there was still a net growth in share price from April’s $147.75 to October’s $155.88. Here is a chart of NUE’s price over the past 180 days.
Exploring Nucor Corporation’s High Quality, Progressive Momentum, and Rising Stability Ratings
NUE has an overall C rating, translating to a Neutral in our POWR Ratings system. It is ranked #20 out of the 32 stocks in the Steel category.
Based on the POWR Ratings provided, the three most noteworthy dimensions for NUE are Quality, Momentum, and Stability. Here’s a quick breakdown:
Quality
Quality consistently scores high throughout the various dates. It maintains a favorable score of 95 from April 29, 2023, to July 29, 2023. This dimension saw further improvement in August 2023, climbing to a rating of 97, which it sustained through October 5, 2023.
Momentum
Momentum displays a clear upward trend. Starting from a score of 61 on April 29, 2023, the Momentum dimension increases steadily over the months, achieving its peak rating of 83 on July 29, 2023. After a slight drop in August and September, Momentum regained traction, standing at 79 as of October 5, 2023.
Stability
The Stability rating initially records a low score of 34 on April 29, 2023, but shows evident growth over the coming months. By July 29, 2023, it rises to 44 before reaching 50 by October 5, 2023. Although not as remarkable as Quality or Momentum, Stability still reflects a significant upward trend throughout this period.
If we look closely, NUE maintains high Quality and improving Momentum and Stability scores in the POWR ratings, conveying that those areas hold the most attention.
How does Nucor Corporation (NUE) Stack Up Against its Peers?
Other stocks in the Steel sector that may be worth considering are Nippon Steel Corporation (NPSCY), Ternium S.A. (TX), and Acerinox, S.A. (ANIOY) -- they have better POWR Ratings.
What To Do Next?
Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:
3 Stocks to DOUBLE This Year >
NUE shares were trading at $157.16 per share on Friday afternoon, up $0.73 (+0.47%). Year-to-date, NUE has gained 20.41%, versus a 13.53% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
Nucor (NUE) -- October Buy, Sell or Hold? StockNews.com
