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Why Russian Stock Mechel PAO Soared Today

By Rich Smith – Dec 16, 2021 at 1:33PM

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Hint: It's related to the reason Nucor stock slumped yesterday.

What happened

News that Nucor (NUE 2.06%) is prepared to crush on its fourth-quarter earnings didn't do much good for the American steel giant stock yesterday -- but it sure seems to be helping out one of its rivals.

As of 12:35 p.m. ET, shares of Russian steelmaker Mechel PAO (MTL) are up a mind-boggling 19.7% on no news (specific to Mechel) at all.

Molten steel pouring in a foundry.

Image source: Getty Images.

So what

Why might that be happening? Well, consider: Nucor predicted its fourth quarter will be "the highest quarterly earnings in Nucor history, surpassing the previous record ... that was set in the third quarter of 2021." Nucor investors yesterday weren't particularly pleased to hear the company give earnings guidance for the fourth quarter that strongly suggests it will fall short of analysts' expected $7.95 per share in profit for the quarter. (Instead, Nucor says its earnings will range from $7.65 to $7.75 per share.) 

But no matter what U.S. investors in Nucor think about those specific numbers, Mechel shareholders appear to be taking comfort from Nucor's report. They may especially like Nucor's broader market comments, too, observing that steel "demand continues to be strong in most of the end markets we serve," and the company's prediction that "we are confident that 2022 will be another year of strong profitability for Nucor." 

Now what

Granted, what's good news for Nucor may not necessarily be good news for steelmakers in general, or for Mechel in particular. But when you consider that Nucor is looking for record profits on operating profit margins of less than 22%, while Mechel is cruising along on a better-than-23% operating profit margin, it stands to reason that a good quarter, and a good year, for Nucor will in fact also be a good quarter and a good year for Mechel.

At least, that's what investors seem to think today -- and chances are good that they're right.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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