Nucor (NUE) 2012 Review

Nucor Corp is a manufacturer of steel and steel products (hot rolled steel shapes and cold finished bars, joists and deck) utilizing scrap, electric furnaces, continuous casters and automated rolling mills.  While the economic malaise since 2008 has kept profits flat, the company has grown dividends at a 20% pace over the last 10 years earning a return on equity as high as 35%.  Despite recent difficulties, the longer term outlook for NUE remains bright because:

(1) a large percentage of sales are covered by long term contracts which stabilizes its production and includes surcharges allowing it to pass on higher raw material costs,

(2) management’s focus on innovative and cost efficient ways to produce steel,

(3) an aggressive acquisition program that concentrates on purchases that is accretive via new cost saving technologies or add-ons to its product line,

(4) utilization rates are starting to rise.

 Negatives:

(1) continued sluggish global economic growth, especially in Europe which is NUE’s largest market,

(2) the ongoing auto improved mileage regulatory requirements likely means substituting lighter weight materials for steel,

(3) it is in a highly competitive industry.

Nucor is rated A by Value Line, carries a 30% debt to equity ratio and its stock yields over 4.0%.

Statistical Summary

                 Stock      Dividend         Payout      # Increases  

                 Yield      Growth Rate     Ratio       Since 2002

NUE          4.0%            6%             50%            10*

Ind Ave      2.6               6                34               NA 

                Debt/                        EPS Down       Net        Value Line

                Equity         ROE      Since 2002      Margin       Rating

NUE         30%            12%            4                6%           A

Ind Ave     32               10              NA              5             NA

*NUE pays bonus dividends which distort the dividend statistics.

  

     Chart

            Note: NUE stock made good initial progress off its November 2008 low, quickly surpassing the downtrend off its May 2008 high (straight red line) and the November 2008 trading high (green line).  It soon lost its upward momentum and has traded in a range for some time.  Long term, it is in an uptrend (blue line is the lower boundary).  Intermediate term it is in a trading range (purple lines).  The wiggly red line is the 50 day moving average.  The Dividend Growth Portfolio owns a 75% position in NUE---the result of Selling Half at $44 on a trading basis, then buying back some shares at $36.  The upper boundary of its Buy Value Range is $42 (NUE is currently on the Dividend Growth Buy List); the lower boundary of its Sell Half Range is $93.

http://finance.yahoo.com/q?s=NUE

11/12