What happened
Shares of Nucor (NUE 0.25%) tumbled 11.2% in January, according to data provided by S&P Global Market Intelligence. While the steelmaker reported record fourth-quarter and full-year results in January, its outlook came in a bit light, which weighed on the stock.
So what
Nucor reported strong fourth-quarter results last month. Its sales increased 97%, compared to the prior-year period. The primary driver was higher steel prices, which were up 99%, versus the fourth quarter of 2020. That more than offset a 1% decline in outside steel shipments during the period.
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That helped push the company's full-year sales up 81%, compared to 2020. The drivers were an 11% improvement in shipments to outside customers and a 64% increase in the average price per ton. That made 2021 a record financial year for the steel company.
It also allowed Nucor to return more money to shareholders. In December, the company approved a new $4 billion share-repurchase plan. It also increased its dividend for the 49th straight year. That's one year shy of earning the elite crown of a Dividend King.
However, while Nucor ended 2021 on s strong note, it warned of some potential headwinds in the first quarter. Even though steel demand remains strong, the company sees its earnings declining slightly in the first quarter from the fourth-quarter's record due to decreased profitability at its sheet mills. It anticipates some impact from lower scrap prices on its scrap brokerage and processing operations.
Now what
While Nucor expects the first quarter to be a little lighter than its record results in the fourth quarter, that hasn't dimmed its outlook for 2022. The company noted in its earnings release that it's "confident that 2022 will be another year of strong profitability." Aside from continued strong demand for steel, the company sees its share-repurchase program helping boost its per-share results since they'll benefit from lower weighted-average shares outstanding.
Meanwhile, the company has continued to invest in its long-term growth. In February, Nucor closed the acquisition of California Steel Industries, paying $400 million for a 50% stake. It also announced plans to modernize its Indiana Sheet Mill. It will invest $290 million to expand its production capacity.
These investments position Nucor to benefit from growing steel demand in the U.S. With the country poised to spend more money on rebuilding and expanding its infrastructure in the coming years, these investments should pay dividends for Nucor over the long term.
