The largest North American steelmaker just reported quarterly earnings, and it wasn't just business as usual. Nucor (NUE -0.83%), which has annual sales approximately twice those of its nearest domestic competitor, announced first-quarter 2021 earnings of $942.4 million. That beat the previous quarterly record -- set in 2008 -- by more than $200 million. 

For investors, the questions are how long the business's strength will last, and how to profit from it.

In regards to the first question, Nucor has already given investors an indication that the peak has not yet arrived. In its Q1 earnings release, management said it expects to set yet another earnings record in the second quarter. But before investors buy into Nucor, it's important to understand what's driving these strong results, and what that might mean for shareholders. 

Sunrise view of Nucor Texas steel plant

Nucor Steel Texas plant. Image source: Nucor.

In record territory

To know how much momentum this business environment has left, it's worth researching how it came to be. Several factors played a role, and consolidation in the steel industry was one of them. Competitor U.S. Steel (X 0.13%) bought mini-mill operator Big River Steel, giving it lower-cost operations that could allow it to throttle back or shut down some of its older, less efficient assets. Cleveland-Cliffs (CLF 1.35%) bought AK Steel as well as the U.S. assets of European-based ArcelorMittal (MT -0.57%)

Imports also came into focus over the past several years, with many restrictions and tariffs being implemented to thwart dumping by foreign producers into the U.S. market. Then, of course, the pandemic hit. Many major steel customers including in the automotive, appliance, and construction markets suspended or slowed operations. Inventory levels for their products began to slide, which left those steel buyers in need of plenty of raw materials to meet market demand once they ramped their operations back up. Steel demand quickly snapped back. At the same time, though, the supply chains disrupted by the pandemic have yet to get back to normal. 

"Most of the end-use markets we serve remain strong and inventories remain lean across supply chains," Nucor CEO Leon Topalian said in this week's earnings release.

Importantly, Nucor has been strategically investing into more value-added markets, and continued to move most of those projects forward throughout 2020, despite the crisis. Some of those assets are already contributing to the bottom line. 

What comes next

Topalian also said the company expects "the current favorable demand environment will continue through the rest of 2021." Based on its guidance, by the end of the first half of the year, Nucor's 2021 profits should stand at approximately $1.9 billion. That's not far from its previous full-year record earnings. 

If that guidance proves accurate and demand remains strong for the balance of the year, it seems conservative to expect full-year profits of around $3 billion. At a price-to-earnings ratio of 10, Nucor would have a market cap of $30 billion in that scenario. That implies a 30% upside from current levels. 

Other variables

The stock market typically looks ahead, and the record first-quarter results Nucor just announced weren't unexpected. Nor was its forecast of another record quarter to come. How matters are likely to play out in the second half of 2021, however, will determine whether Nucor shares have as much room to run as the numbers above indicate. If investors can see an end to the good times looming on the horizon, it won't matter as much that another record quarter is coming first. 

Demand could also be positively impacted by President Biden's proposed infrastructure package. On the other hand, steel is a global commodity, and if demand moderates in other countries, U.S. steelmakers could face heavier pricing pressure from imports. 

But if the current steel market strength is going persist into 2022 as management predicts, there is still time for investors to get in on what should be a good year for Nucor stock.