The pandemic affected many companies in different ways. Retailers shifted to online orders and curbside pick-up or delivery. Entertainment company Disney, which has historically offered largely in-person experiences, pivoted to focus on a new strategy by scaling its new streaming services. Some essential businesses remained open and realized record sales.

Steelmaker Nucor (NYSE:NUE) operated its mills throughout, aiming to take care of its customers. It also moved forward with many of its ongoing growth-investment projects. Now, as the economy rebounds and other factors have moved in its favor, Nucor is smashing profit records.

In reporting its 2021 second-quarter results, the company announced it has already surpassed its previous annual earnings record in just the first half of the year. The questions for investors are how long the tailwinds will last, what the company will do with the substantial cash flow, and how it will affect shareholders in the long term. 

A pile of cash with a bag of money sitting on top.

Image source: Getty Images.

Blowout results

Nucor reported second-quarter earnings of $1.51 billion, bringing its net income from the first six months of the year to $2.45 billion. The previous annual earnings record came in 2018, with $2.36 billion. Prior to that, 2008 was its best full year ever, with net income of $1.83 billion.

The company sees more records ahead. CEO Leon Topalian issued a statement saying, "We expect to set a new record for quarterly earnings in the third quarter of 2021 as demand remains robust and virtually all the steel end use markets that we monitor are growing."

To give you an idea of just how fast business is currently accelerating, this quarter's sales soared 25% sequentially over the first, which was the prior record quarter for earnings. Business conditions don't typically move that quickly at that level in a cyclical industry like steel. 

Steelworker inspecting sheet steel on a line.

Image source: Nucor.

A combination of things fell into place

There are several factors contributing to the results, with the price of steel itself being one of the primary drivers. Nucor said its average sales price per ton increased 49% compared to the prior year's quarter. General supply/demand dynamics are driving prices higher. The published index futures price of hot-rolled coil steel has tripled from pre-pandemic levels at the start of 2020. 

Other factors supporting pricing are relatively low imports, global supply chain issues, domestic consolidation, and low inventory levels at Nucor's customers. But the company has also set its own course by consistently investing in its business. It committed about $3.5 billion in capital expenditures for growth projects over the last several years. Many of these projects are in the production phase or nearing it. Some are already contributing to results, and the timing is favorable.

Nucor said its steel mills operated at 97% of capacity in the second quarter. The new projects that start producing will be incremental business and added profits for the company. In the last five weeks, it has also announced it is spending $1.37 billion for two new acquisitions in downstream steel products businesses.

Giving back

Nucor is giving added priority to end uses in the growing renewable energy and e-commerce sectors, and both recent acquisitions supply those sectors. But the company isn't just selling to renewable energy operators -- it's focusing its own operating business on long-term sustainability.

The company is North America's largest recycler from producing steel in scrap-based electric arc furnaces. It also says it was the seventh largest corporate buyer of renewable energy in the U.S. last year. And Nucor has committed to lower the greenhouse gas emissions intensity of its steel mills to 77% below today's global steelmaking average.

And Nucor is giving back to shareholders as well as the environment. In May 2021, it initiated a new $3 billion share repurchase plan that replaces a previous plan. In the last three years, Nucor has lowered its number of shares outstanding by more than 6% through buybacks -- all at prices lower than the recent share price. The company recently approved its 193rd consecutive quarterly cash dividend. After its latest dividend increase announced in December 2020, Nucor has also increased its base dividend 48 straight years.

With that record and more than $3.2 billion cash and short-term investments on its balance sheet, it's likely that Nucor will be added to the elite list of Dividend Kings in two years. After generating more than $1 billion of free cash flow in the most recent quarter, it's also likely that Nucor will continue returning capital to investors while it continues to invest back in the business. 

Nucor last paid shareholders an extraordinary supplemental cash dividend in 2008. It wouldn't be surprising to see another coming in the near future as cash continues to pile in. While there's no guarantee shareholders will see that, the base dividend is reliable, and it is safe to say the company's growth investments will continue to pay off. That's what long-term investors need to focus on, and the results this quarter should give shareholders plenty of confidence that the future looks bright.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.