Nucor Corporation NUE is currently trading at a forward price/earnings of 13.31X, a roughly 22% premium to the Zacks Steel Producers industry average of 10.9X. NUE is trading at a premium to Steel Dynamics, Inc. STLD and a discount to United States Steel Corporation X.
NUE’s P/E F12M Vs. Industry, STLD and X
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The NUE stock has seen a 32.5% decline in its share price over the past year. The downside reflects the choppiness in the steel space underpinned by the softness in U.S. steel prices, which has led to a downward revision in NUE’s earnings estimates. NUE has outperformed the industry’s 36.5% decline while underperforming the S&P 500’s rise of 10%. Among its major U.S. steel-making peers, Steel Dynamics has lost 1.1%, while United States Steel has gained 9.3%, over the same period.
Nucor’s One-year Price Performance
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Technical indicators show that NUE has been trading below the 200-day simple moving average (SMA) since Nov. 7, 2024. The stock also slipped below its 50-day SMA yesterday after breaking above that level a day before. Following a death crossover on June 20, 2024, the 50-day SMA continues to read lower than the 200-day SMA, indicating a bearish trend.
The Zacks Consensus Estimate for 2025 for NUE has been revised downward over the past 60 days. The consensus estimate for the second quarter of 2025 has also been revised down over the same time frame.
The Zacks Consensus Estimate for 2025 earnings is currently pegged at $7.88, suggesting a year-over-year decline of roughly 11.5%. Earnings are also expected to decline roughly 17.5% in the second quarter.
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The market appears to have priced NUE’s shares higher despite its bleak earnings trajectory. NUE’s premium valuation may not present a compelling value proposition at these levels. Let’s take a look at the stock’s fundamentals.
Strategic Growth Investments to Aid Nucor Stock
Nucor remains committed to boosting production capacity, which should drive profitable growth and strengthen its position as a low-cost producer. The company has already commissioned some of its growth projects with Gallatin and Brandenburg mills, showing strong production and shipment performance. NUE is investing $6.5 billion in eight major growth projects through 2027. These include the Apple Grove, WV, sheet mill (the largest project), the Lexington, NC, rebar micro mill, and the galvanizing line at the Berkeley County sheet mill.
The company has been focusing on growth through strategic acquisitions over the past several years. The recent acquisition of Southwest Data Products expanded its growing portfolio of solutions for data center customers. The buyout of Rytec Corporation will also allow Nucor to further expand beyond core steelmaking businesses into related downstream businesses. Adding high-performance doors is expected to create cross-selling opportunities with other Nucor businesses and significantly expand its product portfolio for the commercial space.
NUE’s Capital Allocation Backed by Robust Financial Health
Nucor is maximizing its returns to shareholders by leveraging its strong balance sheet and cash flows. It ended first-quarter 2025 with strong liquidity, including cash and cash equivalents and short-term investments of around $4 billion. The company amended and restated its revolving credit facility on March 11, 2025, to increase the borrowing capacity to $2.25 billion from $1.75 billion and to extend its maturity date to March 11, 2030. NUE returned around $2.7 billion to its shareholders through dividends and share repurchases last year and $429 million in the first quarter. The company, in December 2024, raised its quarterly dividend to 55 cents per share from 54 cents. Nucor has increased its regular dividend for 52 straight years since it started paying dividends in 1973. It remains committed to returning at least 40% of annual net earnings to its shareholders.
NUE offers a dividend yield of 1.8% at the current stock price, higher than 1.5% for Steel Dynamics and 0.5% for United States Steel. Its payout ratio is 36% (a ratio below 60% is a good indicator that the dividend will be sustainable), with a five-year annualized dividend growth rate of 7.9%. Backed by strong financial health, the company's dividend is perceived to be safe and reliable.
Retreating Steel Prices Cloud NUE’s Prospects
U.S. steel prices declined sharply last year due to a slowdown in end-market demand and oversupply after a strong run in late 2023 that extended into early 2024. Benchmark hot-rolled coil (HRC) prices tumbled more than 40% last year from $1,200 per short ton at the start of 2024. The downside was due to a combination of factors, including an oversupply of steel exacerbated by increased imports, reduced demand from key industries and economic uncertainties. Sluggish industrial production and construction activities also contributed to the decline.
A slowdown in global automotive production curtailed steel consumption in this key end-market last year. The construction sector in the United States experienced a slowdown due to high interest rates, which dampened steel demand. Elevated borrowing costs and inflation took a bite out of the residential construction industry. Manufacturing activities also weakened amid softening demand for goods and higher borrowing costs.
The Trump administration's imposition of a 25% tariff on all steel imports into the United States led to a rally in HRC prices that continued till late April. However, HRC prices have fallen below the $900 per short ton level of late, impacted by the macroeconomic softness, weakening demand in key markets and rising steel output. Prices are likely to remain under pressure over the near term, given the weak manufacturing and construction backdrop and a challenging demand environment. Lower average realized selling prices hurt the company’s top line in the first quarter. Weaker year-over-year prices are likely to weigh on NUE’s performance.
Final Thoughts: Hold NUE Stock for Now
Nucor benefits from its actions to expand its production capabilities and grow its business through strategic acquisitions. Its efforts to boost production capacity through several growth projects should drive profitability. Despite these positives, NUE remains exposed to the underlying challenges in the steel industry. The recent pullback in steel prices cast a pall on the company's prospects. Its stretched valuation also might not offer an attractive entry point at this time. Holding onto this Zacks Rank #3 (Hold) stock will be prudent for investors who already own it.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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