In the steel world, one name stands out above all the rest, synonymous with "quality." That's North Carolinian mini-mill operator Nucor (NYSE:NUE). And not coincidentally, that's the name we'll be discussing today, in anticipation of the firm's Q2 2006 earnings report, due out tomorrow.

What analysts say:

  • Buy, sell, or waffle? Fourteen analysts follow Nucor. Half say it's a buy; six more a hold; and only one analyst rates the stock a sell.
  • Revenues. On average, the analysts think Nucor grew its sales 17% year over year last quarter, and target a sales number of $3.7 billion.
  • Earnings. From those raw revenues, they believe the company was able to process 30% profits growth for $1.33 per share.

What management says:
 Actions speak louder than words. And Nucor announced two actions last quarter that speak volumes about its confidence in both the near term and long term. Long-term, the company announced a 33% increase in its quarterly dividend, to $0.20 per share. Short-term, Nucor approved a supplemental dividend (meaning it need not be repeated in the future) of $0.50 per share.

And a third action: Despite its share price having nearly doubled over the last 52 weeks (against a 2% rise in the S&P 500), the company continued buying back stock, adding 100,000 shares to a kitty that has amassed 5.7 million repurchased shares since the first quarter of 2005.

What management does:
As the steel market turns south for many investors, Nucor shareholders continue to be rewarded. Rolling gross, operating, and net margins all stand higher today than they were 18 months ago. And although the bottom-line profit margin has been declining over the last year, it appears to be stabilizing now, and gross and operating margins are once again on the rise.

Margins %

12/04

4/05

7/05

10/05

12/05

4/06

Gross

19.9

21.7

21.8

20.5

20.6

20.8

Op.

16.2

18.0

18.2

16.9

16.7

16.8

Net

9.9

11.0

11.2

10.4

10.3

10.3
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
How good of a company is Nucor? Consider that over the last five years, the company's sales have nearly tripled . and its profits on those sales have increased by a factor of 10. Yet over the same time period, the stock itself has "only" quadrupled in value.

As of today, Nucor shares change hands for 12 times trailing earnings, but because the company generates so much more in cash profits than it's permitted to claim under generally accepted accounting principles, it's price-to-free cash flow ratio is less than 9.

Key to the company's success in this regard is its continuing stellar management of working capital. With sales rising 5% in the last six-month period, you'd ordinarily want to see the company keep accounts receivable and inventory growth at or beneath that level. Nucor's record: A/R up just 4%, and inventories down by 22% during the period. Although I don't expect to see any change in the company's execution, seeing more of the same in tomorrow's news would only make me more confident in the company's future.

Competitors:

  • Allegheny Technologies (NYSE:ATI)
  • Mittal Steel (NYSE:MT)
  • Steel Dynamics (NASDAQ:STLD)
  • U.S. Steel (NYSE:X)
  • Wheeling-Pittsburgh (NASDAQ:WPSC)

Mittal Steel is a Motley Fool Inside Value pick. Find more of the market's best bargains with a free 30-day guest pass.

Fool contributor Rich Smith does not own shares of any company named above.