Nucor Corporation (NUE) has revealed a profit of $31.0 million or 10 cents per share in the first quarter of fiscal 2010, down from $58.9 million or 18 cents in the fourth quarter of fiscal 2009. However, in the first quarter of fiscal 2009, the company reported a net loss of $189.6 million, or a loss per share of 60 cents. Reported EPS also surpassed the Zacks Consensus Estimate of 6 cents per share.

The increase in net income was driven by an increase in steel production and a consequent increase in net sales. Net sales plummeted 37.7% year over year to $3.65 billion in the quarter. The increase was attributable to a 48% increase in shipment of steel to outside customers.

During the quarter, average scrap and scrap substitute cost per ton used was $318, down 5% from $333 in the same period of previous year.

Overall steel mill utilization increased to 73% from 58% in the previous quarter and 45% in the first quarter of first quarter of fiscal 2009. Thus, total energy costs slipped $10 per ton from the first quarter of 2009 and declined $1 per ton from the previous quarter. Operating costs and expenses as a percentage of revenue decreased by 12.4%.

Supported by a strong $2.0 billion in cash and cash equivalents and short-term investments, as well as an untapped $1.3 billion revolving credit facility that matures in November 2012, Nucor’s board of directors declared a cash dividend of 36 cents per share. The dividend is payable on May 12, 2010 to stockholders of record as on March 31, 2010.

Nucor recently acquired a 50% interest in NuMit LLC, which will invest in various steel and steel related activities, both in North America and globally.

Nucor’s long-term contracts, cost reduction efforts and a dominant acquisition strategy could be positives in its performance in the coming quarters. We are optimistic on the company’s strong balance sheet, but near-term headwinds in the end-markets are likely to make it difficult for the stock to outperform. As such, we reiterate our Neutral recommendation.
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