Nucor’s (NUE) Q4 Profit Climbs, Earnings Fall Short

Steel giant Nucor Corporation’s (NUE) profit (as reported) for the fourth quarter of 2014 came in at $210.4 million or 65 cents a share, up 23.4% from $170.5 million or 53 cents per share reported a year ago. Profit (as reported) for 2014 was $713.9 million or $2.22 per share, up 46% from profit of $488 million or $1.52 per share in 2013.

Barring inventory-related credit of $57.3 million or 11 cents per share, earnings were 54 cents per share for the fourth quarter. By that measure, earnings missed the Zacks Consensus Estimate by a penny.

For full-year 2014, adjusted earnings (excluding inventory credit) came in at $2.11 per share, which missed the Zacks Consensus Estimate of $2.20.

The Quarter in Detail

Revenues increased 2% in fourth-quarter 2014 to roughly $5 billion from $4.9 billion in the year-ago quarter. Sales, however, missed the Zacks Consensus Estimate of $5.45 billion. Average sales price per ton increased 1% compared with the year-ago quarter. Total tons shipped to outside customers rose 1% year over year to 6,070,000 tons in the reported quarter and total mill shipments increased 2% to 5,317,000 tons.

For full-year, consolidated net sales increased 11% to $21.1 billion from $19.1 billion in 2013. However, consolidated net sales missed the Zacks Consensus Estimate of $21.4 billion.

Overall operating performance at the company’s Steel Mills segment in the fourth quarter was not as expected owing to typical fourth-quarter seasonality. Moreover, imports remained very high in the quarter, exerting downward pressure on the segment’s performance. Volumes, as well as margins, remained under pressure on a sequential basis. However, these were partly offset by the gains from the recently acquired Nucor Steel Gallatin.

The Raw Materials segment’s performance in the fourth quarter was adversely affected by weak performance in the company’s scrap processing business. Results were also affected negatively by the suspended operations of Nucor’s steel plant in Louisiana (where production began in late Dec 2014) owing to equipment failure related to the process gas heater since Nov 2014. The plant is predicted to remain non-functional in the first quarter of 2015.

Financial Position

Nucor exited the quarter with cash and cash equivalents of $1,024.1 million compared with $1,483.3 million a year ago. Long-term debt was $4,360.6 million versus $4,376.9 million a year ago.

Nucor completed the purchase of all the equities of Gallatin Steel Company in the fourth quarter for around $779 million of cash. It also has an unused $1.5 billion revolving credit facility that will likely mature in Aug 2018. Cash flow from operations was $1.3 billion for 2014, compared with $1.1 billion recorded a year ago.

Nucor’s board declared a cash dividend of 37.25 cents per share in Dec 2014, which was the company’s 167th consecutive quarterly cash dividend. The dividend is payable on Feb 11, 2015, to stockholders of record as of Dec 31, 2014.

Guidance

Nucor expects a decline in earnings for the first quarter of 2015 compared with that of first-quarter 2014. Owing to the recent fall in oil prices there will be customer inventory reduction charges, which are expected to impact market conditions for the Steel Mills segment. However, there is a scope for improvement in energy markets when inventory destocking is completed. Moreover, import levels are anticipated to remain high in 2015.

However, Nucor believes that there is a positive trend in nonresidential construction markets, benefiting its steel mills and fabricated construction products businesses. Typical seasonality is expected to affect performance in the company’s downstream products business on a sequential basis in the first quarter of 2015.

Nucor currently carries a Zacks Rank #4 (Sell).

Better-ranked stocks in the steel and related industries include RTI International Metals, Inc. (RTI), LB Foster Co. (FSTR) and Mechel OAO (MTL). While RTI International Metals sports a Zacks Rank #1 (Strong Buy), both LB Foster and Mechel carry a Zacks Rank #2 (Buy).