Steelmaker Nucor Corporation (NUE) unveiled its guidance for the first quarter of 2011. The steelmaker forecasts earnings of 30 cents-35 cents per share for the quarter, compared with earnings of 10 cents per share in the same quarter of 2010 and a loss of 4 cents per share in the fourth quarter of 2010.
The projected results include a LIFO charge of $31 million, or 6 cents per diluted share, compared with a charge of $24 million or 5 cents per share in the first quarter of 2010.
The company’s outlook is based on its increasing profitability in each month of the quarter amid improved utilization rates and increased prices for steel mill products that offset the impact of higher raw materials costs. The company expects positive trends to continue in the second quarter as end markets are seeing some real demand growth, though it can be partly attributable to buyers reacting to rising prices.
The industry has been experiencing a rebound in demand for products sold to the manufacturing sector, including special bar quality products, sheet and plate. However, construction market remains the company’s most challenging market, despite some improvement due to restocking.
Nucor swung to a loss in the fourth-quarter of 2010 as margins slid. The company recorded a net loss of $23.5 million or 4 cents per share in the fourth quarter of 2010, compared with a profit of $58.9 million or 18 cents per share in the year-ago period. The fourth quarter loss was narrower than the Zacks Consensus estimate of 10 cents per share.
However, sales in the quarter shot up 31% to $3.85 billion from $2.94 billion in the year-ago period, missing the Zacks Consensus Estimate of $3.93 billion. The sales growth was driven by a 14% spike in average realized prices and a 15% rise in total shipments.
Headquartered in Charlotte, North Carolina, Nucor is the largest producer of structural steel, steel bars, steel joists, steel deck and cold finished bars in the U.S. The company has 58 operating facilities, primarily in the U.S. and Canada. Over the years, the company has grown through acquisitions as well as by tapping new markets and expanding geographically.
The company’s strong cash flow and balance sheet provide flexibility to continue with its growth strategy. Even though long-term contracts, cost reduction efforts and a dominant acquisition strategy could benefit the company in the coming quarters, the massive industry over-capacity continues to weigh on steel prices. The ongoing slowdown has marred prospects in the housing and construction sectors in the near term.
Nucor currently holds a Zacks #1 Rank (Strong Buy) on its stock for the short term. It competes with United States Steel Corporation (X) and Sumitomo Metal Industries (SMMLY).
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