The Scrappiest Steelmaker of All

Quick, name one thing you learned about sports as a child. Chances are, whether it was a parent or a coach, someone conditioned you to keep your eye on the ball.

Although I missed my share of volleys on the tennis court, I will not for one moment take my eyes off the bellwether stocks of global industry. I continue to encourage every Fool to do the same throughout this complex crisis.

Amid a flurry of earnings reports out this week, scrappy steelmaker Nucor (NYSE: NUE  ) has kept its furnace burning. Despite a 71% drop in fourth-quarter earnings from the prior year, and a telling 86% slide from an impressive third quarter, Nucor managed to earn a tidy profit of $105.9 million through one of the most challenging reversals the industry has ever seen.

Rewarding this resilience, buyers carried the company's stock to an intraday, double-digit percent gain on Wednesday. Smaller competitors Steel Dynamics (Nasdaq: STLD  ) and Schnitzer Steel (Nasdaq: SCHN  ) have come along for the ride, despite posting fourth-quarter losses of $82.7 million and $34 million, respectively.

When it comes to keeping his eye on the ball, Nucor CEO Dan DiMicco is the Joe DiMaggio of industry executives. Over the past several years, DiMicco has built the company into America's second-largest steelmaker and North America's largest metals recycler. Don't expect this CEO to exit out the back door like POSCO (NYSE: PKX  ) leader Lee Ku-taek. As we watch Nucor adapt to the unprecedented challenges now unfolding, the secrets to DiMicco's success are evident.

While participating in the deep production cuts that have shrunk the industry to less than 50% of capacity utilization, Nucor has thus far maintained a no-layoffs policy. As competitors like ArcelorMittal (NYSE: MT  ) and U.S. Steel (NYSE: X  ) have closed entire mills and trimmed their labor forces, Nucor stands at the ready to resume greater production levels the moment orders begin to file in once more. Because of the company's arc furnace technology and retained labor force, ramping up production will require little more effort than the flick of a switch.

Nucor boasts a massive moat of liquidity that's greater than the company's total debt balance. Recognizing lingering uncertainty, Nucor again declined to offer numerical guidance for the present quarter, and quipped that anyone trying to do so is "kidding themselves.” Don't kid yourself, this steelmaker will likely withstand the storm and see you on the other side.

Further Foolishness:

Nucor has been awarded four stars out of five by the steely group of investors that make up the Motley Fool CAPS community. Do they know what they’re talking about? Tell us what you think.

Fool contributor Christopher Barker has a head as thick as a double-hulled steel tanker. He can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He owns no shares in the companies mentioned. POSCO is a Motley Fool Income Investor pick. The Motley Fool has a stainless disclosure policy.


Read/Post Comments (4) | Recommend This Article (32)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 28, 2009, at 7:58 PM, steelbull wrote:

    Well said brother. As a NUCOR employee I will say that because of the pay structure we will always be on top of the game. NUCOR has found a way to keep talanted employees even through the tuff times. No we aren't paid as much in these times, but we still make a great living. Unlike other steel companies NUCOR will not have to rehire when the boom hits. We are on the ready, and like you said "flip the switch" and we will return to full production.What more can you ask for in a company, no layoff,still get paid in the tough times,and company is still profitable. what a great place to work.(DiMicco for president)

  • Report this Comment On January 28, 2009, at 8:36 PM, SCBergman wrote:

    Yep. Nucor's a good one. I think well thought out steel is a definate buy. I'm moving toward SUTR ( I love sutr), NUE, MT, and looking at several others. The good steel companies will weather fine if the recession worsens (Obama infrastructure play) or if it improves with new building. Either way the market plays, you win.

  • Report this Comment On January 28, 2009, at 8:50 PM, XMFSinchiruna wrote:

    steelbull,

    Thanks for your great comments! I bet you were happy to hear about the "extraordinary bonus" announced during the conference call as well! You take care of your own during tough times, and everyone's the better for it. I wish more companies would follow Nucor's lead and not be so quick with the layoffs.

    I've been listening to Nucor's earnings conference calls every quarter for a couple of years now, and I am extremely impressed with Dan DiMicco.

    SCBergman

    I agree with your assessment. With the stimulus plan just passed, we should see investors begin to recognize precisely what you point out.

  • Report this Comment On January 28, 2009, at 10:17 PM, nerd1951 wrote:

    I had a chance to work with some NUCOR folks on a project. The people and the condition of the plant impressed me enough to look deeper. Now I'm a NUCOR stock holder.

    One of the things that really impressed me is that they are continuing capital investments through the slump. They are investing in existing plants and have plans for a new plant in the works.

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