On Wednesday, Citi reaffirmed its Buy rating on Nucor Corporation (NYSE:NUE) with a steady price target of $240.00. The firm's analysis adjusted the second quarter 2024 earnings per share (EPS) to $2.24, which aligns with Nucor's own guidance range of $2.20 to $2.30 per share. The revision was based on an expected $1.2 billion in earnings before interest, taxes, depreciation, and amortization (EBITDA) for the quarter.
The firm also revised its earnings estimates downward for both the third and fourth quarters of 2024 due to a sharper than anticipated decline in sheet prices. The third quarter is projected to be weaker than the second, with an estimated EBITDA of $0.9 billion. This is attributed to the pricing trajectory of sheet and plate products, with sales for July and August largely accounted for.
The fourth quarter is expected to experience a seasonal uplift in sheet prices, but this may be counterbalanced by potentially weaker shipments, resulting in a forecasted EBITDA of $1.0 billion. Despite these adjustments, Citi's 2025 EBITDA estimate for Nucor remains unchanged at $5.5 billion.
Citi's outlook suggests a belief that the current downturn in the steel market is temporary and that there are positive medium-term trends to consider. These include industry consolidation, disciplined production, the impact of tariffs, and an anticipated increase in demand driven by domestic infrastructure projects.
In other recent news, leading U.S. steel manufacturers, including Nucor, Steel Dynamics (NASDAQ:STLD), and U.S. Steel, are expected to report lower earnings for the second quarter. This is due to a decrease in steel prices, driven by a surplus in supply and lower demand.
Analysts, including from MEPS International and Syracuse University, suggest that the downward trend in prices may continue into the summer, possibly triggering a resurgence in purchasing activity if prices reach a low enough point.
BMO (TSX:BMO) Capital maintained a Market Perform rating for US Steel, while Nucor's shares saw a price target reduction from $185.00 to $175.00 by the same firm. In contrast, Citi Research upgraded Nucor to a Buy rating with a target price of $240.00.
In corporate developments, Nucor recently announced the acquisition of Rytec Corporation, a commercial door manufacturer, for $565 million. Analysts at Jefferies believe this strategic move will expand Nucor's downstream investments and diversify its product offerings.
Additionally, Nucor is undergoing a change in executive leadership with Douglas J. Jellison set to retire and Randy J. Spicer assuming the role in May 2024.
InvestingPro Insights
InvestingPro data reveals that Nucor Corporation (NYSE:NUE) has a current market capitalization of $39.86 billion and trades at a P/E ratio of 9.7, reflecting a market sentiment that values the efficiency of the company's earnings. A closer look at the company's financials shows a solid gross profit margin of 21.58% over the last twelve months as of Q1 2024, indicating a strong ability to control costs relative to revenue.
Two key InvestingPro Tips can provide additional context to Citi's outlook on Nucor. Firstly, Nucor's management has been actively buying back shares, a sign of confidence in the company's value proposition and future growth. Additionally, the company has a high shareholder yield, which is further evidenced by its impressive history of raising its dividend for 14 consecutive years. This commitment to shareholder returns is noteworthy, especially in light of the stock's price resilience, which is reflected in an 8.33% total return over the last week.
For readers seeking a deeper dive into Nucor's performance and strategic outlook, InvestingPro offers additional tips that may be of interest. There are 15 more InvestingPro Tips available, which include insights on the company's long-term profitability, its status as a prominent player in the Metals & Mining industry, and its strong return over the last five years. To explore these valuable insights, visit https://www.investing.com/pro/NUE and remember to use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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