Nucor Corporation (NUE) is the nation's largest recycler of steel scrap. Long-term contracts, constant cost reduction efforts, higher steel prices, lower interest rates, strong cash flow position and a dominant acquisition strategy inspire our optimism with respect to the stock's performance in the coming quarters.
The company's third-quarter 2008 profit nearly doubled mainly because of robust sales from recently acquired steel and scrap-metal companies. However, a slowdown in steel demand from the automobile sector and increased production in China are matters of concern. Rising prices of raw materials such as scrap and natural gas are serious issues facing the company. Thus, we maintain our Hold rating and set our six-month target price to $27.
Currently, shares of Nucor Corp. are trading at 3.7x our 2008 EPS estimate of $6.91. The company's constant cost-reduction efforts and strong cash flow position lead us to maintain a positive outlook with respect to the stock's performance.
However, Nucor 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 have set a six-month target price of $27. This is 3.9x our 2008 EPS estimate.
Read the full analyst report on NUE
Get real-time market insights and profitable stock recommendations from the team of analysts at Zacks Equity Research. See all todays Analyst Blog entries on Zacks.com.