What happened

Shares of U.S. steel giant Nucor (NUE 0.84%) rose just shy of 25% in May according to data from S&P Global Market Intelligence. That's a huge monthly gain that easily outdistanced those of its closest domestic peers. But that's not the end of the story. Through the first five months of 2021, Nucor's stock rose an incredible 92%, also besting its industry competitors. There's a couple of things going on, some specific to Nucor and some involving the bigger picture.  

So what

One of the big stories in Washington, D.C., this year is infrastructure spending. The issue isn't whether spending needs to take place, but how big the final bill should be. While there are complicated political issues involved that will dictate the final outcome, one thing there is material agreement on is that physical assets in this country need an upgrade. And that should mean more demand for steel. Now add in the reopening economy and already strong construction markets, and the entire steel sector has been in an uptrend. 

A steel worker in a foundry with molten steel pouring from a vessel.

Image source: Getty Images.

However, Nucor, which is the largest and most diversified domestic mill, has performed materially better than peers. Part of that has come from recent strong results; the first-quarter update released in late April included earnings of $3.10 per share, up from $0.07 in the year-ago period and $1.30 per share in the fourth quarter of 2020. More important to Wall Street, however, is likely that Nucor projected that second-quarter earnings would be above first-quarter levels and hit a new record. Later in the month, meanwhile, the company announced plans to upgrade a mill so it can produce more high-value products for the auto sector. And about a week after that, Nucor announced a $3 billion stock buyback program to replace its current $2 billion program, under which $1.55 billion worth of stock was acquired. The stock rallied after that last bit of news and actually managed to hold its ground while other steel stocks pulled back in the second half of the month. So it's likely that the news flow out of Nucor was an important factor for investors. BMO Capital increased its price target on the stock from $86 to $110 on the buyback news.  

Now what

Nucor is probably one of the best-run steel mills in the world, as highlighted by its 48-year streak of annual dividend increases. That's impressive when you consider that the steel industry is highly cyclical. That said, the stock has risen sharply this year and most long-term investors, and anyone with a value bias, would probably be better off waiting for a better entry price. But keeping Nucor on your wish list is a good call, given that it is always trying to find ways to become a better steel mill -- consider the early June announcement that it is buying Cornerstone Buildings Brands' insulated metal panels business for $1 billion. That move will further Nucor's efforts to use its own steel for value-added products, which ultimately improves the company's long-term margins.