Nucor Forges Ahead

Nucor's operations improved in the first quarter, and its financial position is still strong, but its foreign competition remains a big problem.

Apr 25, 2014 at 1:00PM

In the first quarter, Nucor's (NYSE:NUE) revenue increased 12%, and earnings per share increased 35%. The stock traded down slightly on the announcement, largely a function of weaker-than-expected guidance for next quarter. Setting aside that concern, this was a solid quarter for Nucor.

1. Operational results are encouraging
Nucor's operations can be measured by the amount of steel produced and shipped, the prices it receives for its steel, the cost of inputs, and its ability to utilize its steel mills. On most of those measures, Nucor reported strong results, despite a moribund steel industry.

Steel production and shipments, measured by the ton, increased 8% and 7%, respectively. Sales price per ton increased 3%. Not a huge increase, and it outpaced Nucor's scrap costs, which increased by 5%. But operating rates at Nucor's steel mills increased. Utilization this quarter was 75%, which is still low, but it's an improvement from 72% utilization a year ago. All together, pre-tax profits increased 11%.

2. Financial position remains very strong
Nucor has $4.4 billion in debt and $1.2 billion in cash. That might not seem impressive, but compared to other steel producers, Nucor's balance sheet is extremely strong. It is the only steel producer in North America that boasts an investment grade credit rating.

This financial strength has allowed the company to regularly pay quarterly dividends for 41 years, despite the cyclicality of the steel industry. The current yield is 2.8%.

It's also a significant competitive advantage, as it allows the company to make smart investments during industry downturns that will pay off during boom times. Here's how Nucor CFO James Frias explains it:

Our financial strength is a significant competitive advantage. It allows us to invest aggressively during downturns to grow our long-term earnings power, which is a strategic initiative of Nucor. During the steel industry's current lengthy downturn, Nucor has invested in a broad range of strategic investments... With these investments, we are extremely well positioned to capitalize on the inevitable steel industry's cyclical upturn.

3. Foreign competition is still a big problem
In 2009, the U.S. imported 25% of its steel. By 2013, this had increased to 30%, and year to date, 36% of steel has come from foreign sources. Nucor CEO John Ferriola describes this trend as "alarming," and he lays a big portion of the blame on foreign governments that subsidize their steel industries. Here's what he said on the conference call:

Global steel production overcapacity is the greatest threat to Nucor and to our industry. Illegal government subsidies from China and other countries have allowed large amounts of cost-inefficient capacity to stay in production and dump steel into the global marketplace.

Foolish bottom line
My perspective on Nucor hasn't changed much from last quarter. While the steel industry remains far from its cyclical peak, Nucor is a tremendously well-run company. It's got a great culture, solid managers, and a strong balance sheet, and the company is investing for better times. I don't know when the steel cycle will turn, but I admire Nucor's ability to continue to perform in tough times while paying investors a nice dividend to wait for things to get better. 

Three stocks to own for the rest of your life
As every savvy investor knows, Warren Buffett didn't make billions by betting on half-baked stocks. He isolated his best few ideas, bet big, and rode them to riches, hardly ever selling. You deserve the same. That's why our CEO, legendary investor Tom Gardner, has permitted us to reveal "The Motley Fool's 3 Stocks to Own Forever." These picks are free today! Just click here now to uncover the three companies we love. 


Brendan Mathews owns shares of Nucor. The Motley Fool recommends Nucor. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers