Shares of U.S. steel company Nucor remained relatively stable after the announcement of disappointing fourth-quarter guidance, as investors are more focused on what lies ahead. Nucor stated that earnings for the fourth quarter are expected to fall between $2.75 and $2.85 per share. This represents a decline from the third quarter's net earnings of $4.57 per diluted share and the 2022 fourth quarter's earnings of $4.89 per diluted share.
While Wall Street had predicted a decline, the actual range was slightly lower than analysts' projections of $3.19 per share for the fourth quarter. The quarter started with benchmark steel prices below $800 per ton and has risen to approximately $1,100 per ton. However, there is often a delay between spot prices and the prices customers receive, and the prices of scrap steel, Nucor's key raw material, also play a significant role.
During the third quarter, benchmark scrap steel prices averaged around $340 per ton, and they have slightly increased to about $360 per ton. Despite this disappointing guidance, Nucor's stock rose by 1.2%, while the S&P 500 and Dow Jones Industrial Average futures saw a 0.3% increase.
The performance of Nucor shares is typically influenced by expectations for steel prices and the spread over their raw materials. Recently, these factors have been relatively stable, resulting in flat shares over the past three months. Over the past year, however, the stock has gained approximately 13% as earnings estimates for 2024 have risen from around $10 per share to $12.60 per share.
Currently, Nucor stock is trading at around 13 times the estimated earnings for 2024, which is within its five-year range. Steel stocks generally have lower earnings multiples when conditions are favorable and higher multiples during challenging periods, as is typical for cyclical stocks. Nucor has experienced a range of 5 times to 21 times the estimated earnings for the next year over the past five years.
In summary, Nucor's disappointing fourth-quarter guidance has prompted investor attention towards future prospects. Despite current challenges, the stock has shown stability and potential growth, with steel prices and raw material prices playing crucial roles in determining its performance.
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