From the Monongahela valley,
To the Mesabi iron range,
To the coal mines of Appalachia --
The story's always the same.
Seven hundred tons of metal a day.
Now sir you tell me the world's changed,
Once I made you rich enough --
Rich enough to forget my name.
-- "Youngstown," Bruce Springsteen
We'll get back to today's National Poetry Month morsel at the end of the story. Steel mills and smelting plants rarely make for exciting epics, but there is this one notable exception. I'm talking about Nucor
What analysts say:
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Buy, sell, or waffle? Sixteen analysts follow Nucor today. Five of them are buying, two are selling, and the other nine prefer to hold. In our Motley Fool CAPS database, it's a steady three-star stock, based on over 160 user ratings.
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Revenues. The average forecast calls for about $3.67 billion in net sales, 3.4% above the $3.55 billion of last year.
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Earnings. $1.23 per share would satisfy the consensus estimate, up from $1.21 a year ago. But the analyst range is quite wide, going from $1.08 to $1.36 per share
What management says:
Management really doesn't say much, preferring to let the company's performance speak for itself. The cover of the 2006 annual report is a listing of all Nucor employees by full name, which says a great deal about the culture here. More on that in a minute.
What management does:
Margins and returns have generally been on the upswing for three years now, and closer to accelerating than to slowing down. Rising global steel prices play a part, of course, but give credit to Nucor's management for a number of shrewd acquisitions in 2002 and 2003 that paved the way to larger market reach at just the right time for a rejuvenated steel industry.
|
10/2005 |
12/2005 |
4/2006 |
7/2006 |
9/2006 |
12/2006 |
|
|---|---|---|---|---|---|---|
|
Gross |
20.3% |
20.3% |
20.8% |
21.7% |
23.3% |
23.5% |
|
Operating |
16.9% |
16.8% |
16.8% |
17.5% |
19.0% |
19.8% |
|
Net |
10.4% |
10.3% |
10.3% |
10.8% |
11.7% |
11.9% |
|
FCF/Revenue |
12.3% |
14.2% |
13.8% |
13.3% |
12.1% |
13.0% |
|
Efficiency Ratios |
10/2005 |
12/2005 |
4/2006 |
7/2006 |
9/2006 |
12/2006 |
|---|---|---|---|---|---|---|
|
Return on Assets |
20.8% |
20.1% |
19.2% |
20.9% |
23.2% |
24.3% |
|
Return on Equity |
36.4% |
33.9% |
32.0% |
34.5% |
38.6% |
38.6% |
One Fool says:
And it's happening once more. We saw $78 billion of steel handler mergers and acquisitions in 2006, and Nucor itself is at it again, recently closing its buyout of Canadian rebar and wire mesh maker Harris Steel. CEO Dan DiMicco explicitly prefers to add already-profitable businesses rather than building new facilities, simply to keep the price-busting threat of oversupply at bay.
You may wonder why a self-confessed tech geek is writing about steel mills today. I reviewed Jim Collins' management book Good to Great a few months ago, in which Nucor is one of the handpicked examples of corporate greatness. That book inspired me to learn more about the company, and I've gained a lot of respect for management -- current and past -- as a result.
This is a human and humane business in the mold of Costco
Direct competitors like US Steel
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Fool contributor Anders Bylund holds no position in any of the companies discussed here -- yet. Did you know that Foolish CEO Tom Gardner sits in a cubicle exactly like that of any other writer, editor, or behind-the-scenes Fool at HQ? You can check out Anders' holdings if you like, and Foolish disclosure is tougher than steel.
