Summary
- Nucor saw strong results in plate and most long products in the fourth quarter, and this could be a source of relative strength in 2019 if construction activity holds up.
- High utilization rates should support margins, but the best companies are already near the limits of utilization improvements, and EBITDA has likely peaked.
- It's hard for me to construct a valuation argument where Nucor is cheap, but I will note that Nucor's leverage to long and plate products could drive some relative outperformance.
I continue to prefer Steel Dynamics (STLD) among U.S. steelmakers, but Nucor (NUE) has been the better performer over the past year (they're tied over the last two years, and STLD wins the five-yr comp), and the shares are up about 15% since the Christmas Eve 52-week low on renewed enthusiasm over better steel demand and pricing in 2019. I do like Nucor's comparatively stronger leverage to long products and plate (where I think prices will be noticeably better in 2019 relative to hot-rolled coil), but I think investors will need to wait until 2021/22 to see year-over-year growth in EBITDA again (on a full-year basis), and I see more that can go wrong with pricing and demand at this point than what can go right.
