Summary
Nucor's ability to significantly grow shipment volumes is somewhat constrained, but higher prices helped deliver 25% year-over-year revenue growth with meaningful margin leverage.
The company is well-placed to reap the benefits of its through-the-cycle investment philosophy, with multiple growth projects about to start delivering into a very healthy price environment.
Nucor shares have upside into the $70s, as steel volume demand and pricing both remain strong.
Nucor (NYSE:NUE) is one of the best-run steel companies in the world, and is well-placed to continue benefiting from the combination of strong demand in the U.S. (fueled by still-healthy demand from construction and various manufacturing sectors) and protectionism-supported pricing. With capacity utilization now in the mid-90%'s and at much stronger prices, strong margin leverage and FCF generation are also coming through for this company.
Nucor wasn’t my preferred choice in the steel space back in February of this year, and the two I liked better (Ternium (NYSE:TX) and Steel Dynamics(NASDAQ:STLD)) have slightly outperformed Nucor since then, though Nucor has done well compared to others like Gerdau (NYSE:GGB), ArcelorMittal(NYSE:MT), and POSCO (NYSE:PKX), particularly since the protectionist measures went into effect. Looking at the shares again today, I’d still favor Steel Dynamics over Nucor in a head-to-head, but it’s close, and I think Nucor is a perfectly legitimate way to play whatever is left in this run for the sector.
