An update has come out on Nucor Corporation (NUE), in which senior steel industry analyst Paul Raman, CFA is restating his Hold rating on the company. We excerpted the following details:
'Nucor Corporation is the nation's largest recycler of steel scrap. Long-term steel contracts, constant cost reduction efforts, higher steel prices, lower interest rates, strong cash flow position, and a dominant acquisition strategy raise our optimism with respect to the stock's performance in the coming quarters.
However, a slowdown in steel demand from the automobile sector and increased production in China are matters of concern. Thus, we rate the stock a Hold and raise our six-month target price to $62.00.
'In the third quarter, Nucor Corporation reported 2007 results diluted earnings per share were $1.29 down from $1.70 in the prior-year quarter. Net sales were up 8% to $4.26 billion, compared to $3.93 billion in the second quarter of 2006. This was due to softness in demand in the steel market owing to large imports of steel and steel products from China and lower demand from the automotive and residential construction segments.
'Moreover, higher scrap and energy costs also negatively influenced earnings. In the fourth quarter of 2007, EPS is anticipated to be in the range of $1.10 to $1.20 per diluted share.
'Currently, shares of Nucor Corp. are trading at 12.2x our 2007 EPS estimate of $4.86. The company's constant cost reduction efforts and strong cash flow position lead us to have a positive outlook with respect to the stock's performance. However, NUE is witnessing a slowdown in steel demand, higher raw material costs and threat of competition. Thus, we rate the stock a Hold. Based on higher steel prices and lower interest rate we raise our six-month target price to $62.00. This is 12.8x our 2007 EPS estimate.'
Read the full analyst report on NUE.
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