Will Steel Mills Segment Aid Nucor's (NUE) Q3 Earnings?

Nucor Corporation NUE is set to release third-quarter 2018 results on Oct 18, before the opening bell.

In the last reported quarter, the steel giant reported negative earnings surprise of 1.4% by posting adjusted earnings of $2.07 per share, which missed the Zacks Consensus Estimate of $2.10.

Revenues went up roughly 24.9% year over year to $6,460.8 million, but lagged the Zacks Consensus Estimate of $6,492.9 million.

Notably, Nucor beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, delivering an average positive surprise of 6.1%.

The stock has gained 6.3% in the past year, against the industry’s 2.8% decline.

 


 

Will the company surprise investors again or is it heading for a possible pullback? Let’s see how things are shaping up for the upcoming announcement.

Factors at Play in Q3

In September, Nucor issued guidance for third-quarter 2018. The company expects earnings in the band of $2.35-$2.40 per share, reflecting an increase from $2.13 in the second quarter and 79 cents in the year-ago quarter. Per the company, projected figures include an expected benefit of roughly $25 million or 6 cents, related to insurance-related recoveries.

Moreover, the company is still under the process of performing asset impairment analysis. As such, it expects to record an impairment charge in the third quarter due to the impact on impairment valuation model. However, the company was not able to project any specific amount of potential impairment charge. Hence, the same was not included in the guidance.

Total revenues for the third quarter are projected to increase roughly 1% sequentially and 26% year over year, respectively. The Zacks Consensus Estimate for third-quarter revenues is currently pegged at $6,524 million.

The company expects earnings in the third quarter to maintain the strong performance trend this year as it believes that there is sustainable strength in steel end-use markets. The performance of the steel mills segment is likely to increase sequentially in the third quarter on the back of higher earnings in the sheet mills and plate mills, which is expected to offset the weather-related impact and planned outages at some mills.

However, earnings in the steel products and the raw materials segments are expected to witness a sequential decline in the third quarter. Per the company, the downtrend in the raw materials division is due to the decreased performance of scrap brokerage and processing operations along with the reduced performance of DRI facilities as a result of outages at the Louisiana DRI facility during the third quarter.

Nucor Corporation Price and EPS Surprise

 

Nucor Corporation Price and EPS Surprise | Nucor Corporation Quote

 

Earnings Whispers

Our proven model does not show that Nucor is likely to beat estimates this quarter. That is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below:

Earnings ESP: Earnings ESP for Nucor is -0.49%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are currently pegged at $2.34 and $2.35, respectively. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Nucor currently carries a Zacks Rank #2, which when combined with a negative ESP, makes surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here

Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks Poised to Beat Estimates

Here are some companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

FMC Corporation FMC has an Earnings ESP of +3.64% and carries a Zacks Rank #2.

Celanese Corporation CE has an Earnings ESP of +0.62% and carries a Zacks Rank #2.

Ingevity Corporation NGVT has an Earnings ESP of +6.95% and carries a Zacks Rank #3.  

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Source: Zacks



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