Shares of Nucor Corp. experienced a significant decline on Friday as the steelmaker alerted investors that earnings for the current quarter are expected to fall short of expectations. The stock, identified as NUE, dropped 5.5% during afternoon trading, setting it on course to close at a three-month low. Nucor Corp. ranked among the worst performers in the S&P 500 index for the day, and this decline also affected the shares of other steelmakers.
Lower Pricing and Volumes Impact Earnings
According to a statement released late Thursday, Nucor Corp. expects earnings for the steel mills segment to decrease in the third quarter of 2023 compared to the previous quarter. This decline is primarily due to lower pricing, with volumes also playing a lesser role. The company believes that its sheet mills will face the largest impact on earnings.
This warning comes after Nucor Corp.’s conference call in July, where they stated that steel mill earnings were projected to decline in the third quarter due to lower margins offsetting stable shipments.
Projected Third Quarter Earnings
For the third quarter, Nucor Corp. anticipates earnings per share (EPS) to be between $4.10 and $4.20. This is a decrease compared to the EPS of $5.81 in the sequential second quarter and $6.50 in the same period last year. The current FactSet EPS consensus stands at $4.43, which has been revised down from $4.61 at the end of August.
Nucor Corp. is expected to report its third-quarter results in late October.
Impact on Other Steel Companies
The profit warning from Nucor Corp. also had a negative impact on its peers in the industry. Shares of Steel Dynamics Inc., identified as STLD, slid 2.9%, while U.S. Steel Corp.’s stock, designated as X, fell 0.4%.
Concerns over the Fourth Quarter Outlook
J.P. Morgan analyst William Peterson expressed his concerns regarding the fourth-quarter outlook and reiterated his underweight rating on Nucor Corp.’s stock. He cited weakness in the nonresidential sector, which is the company’s largest end market, as the reason for his bearish rating. Peterson noted that there is expected to be further downward momentum in sheet pricing during the fourth quarter, with this trend being heavily influenced by the duration of the United Auto Workers’ strike against the Big 3 automakers. As the automotive sector is one of Nucor’s key customers, the strike has a direct impact on their business.
Stock Performance
Over the past three months, Nucor Corp.’s stock has gained 3.5%, while the S&P 500 index has seen a slight increase of 0.65%.
