What happened
Nucor (NUE -1.08%) is turning out to be a massive outperformer this year. The steel stock rallied even higher this week and hit its 52-week peak on Friday. As of 3:40 p.m. ET on Friday, Nucor shares had gained 15.4% through the week, according to data provided by S&P Global Market Intelligence.
Steel prices are soaring, and so are Nucor's profits and cash. Even better, the steel giant is putting all of that cash to good use.
So what
Nucor has belted out record quarter after record quarter over the past year or so, and it's not done just yet. Last week, the company said it expects to report record numbers for its first quarter, with earnings per share expected to more than double year over year to a range of $7.20 to $7.30 per share.
Nucor also said it recently raised prices of products within its steel mills segment and expects the move to boost profitability. It is thus confident that 2022 will be "another very strong year."
Image source: Getty Images.
Friday morning, Nucor said it'll pay off debt worth $500 million that was due in mid-2023. The company is clearly making a lot of money in the present business environment and using it judiciously to repay debt and reward shareholders.
Steel prices have skyrocketed ever since Russia invaded Ukraine. Both countries are major exporters of pig iron (a key steelmaking input), but sanctions on Russia and suspension of manufacturing activity in Ukraine have disrupted supply and sent prices of steel and steel products soaring.
This week, J.P. Morgan analyst Michael Glick projected steel prices will remain firm through the year, and therefore raised his 12-month price target on Nucor stock to $129 a share from $113. That's still conservative given that shares were already trading at around $157 as of the time of this writing.
Now what
I've been pounding the table on Nucor stock for several months now, and I still see solid growth prospects for the company given its unparalleled foothold in the steel industry. That said, remember that Nucor is a commodity and cyclical stock, so the market could dump it just as fast as it pumped it if steel prices reverse course.
Put another way, Nucor stock could be volatile. Yet you needn't worry as it should remain one of the best stocks to own over the long term, especially if you're seeking passive income even during tough times.
