Nucor CEO Expresses Confidence Despite Lower Earnings and Weak Q2 Guidance

Nucor reports lower Q1 earnings, but CEO confident in long-term performance. Moderated prices, increased volumes, and focus on sustainability key factors.

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Mazhar Abbas
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Nucor CEO Expresses Confidence Despite Lower Earnings and Weak Q2 Guidance

Nucor CEO Expresses Confidence Despite Lower Earnings and Weak Q2 Guidance

Nucor Corporation, one of the largest steel producers in the United States, reported lower earnings for the first quarter of 2024 and provided weak guidance for the second quarter. Despite these challenges, Nucor CEO Leon Topalian expressed confidence in the company's long-term performance, citing moderated prices and increased volumes in the steel products segment as key factors.

In the first quarter, Nucor generated EBITDA of $1.5 billion and net earnings of $845 million ($3.46 per diluted share), a decrease from the $1.14 billion in earnings reported in the same quarter last year. Total shipments to outside customers reached 6.2 million tons, with steel mill pricing up nearly 10% from the prior quarter. The steel mills segment saw quarter-over-quarter earnings growth due to increased average selling prices and volumes, particularly at its sheet mills. However, the steel products division experienced a sequential earnings decline due to lower prices and volumes.

Why this matters: Nucor's performance and outlook provide insights into the broader steel industry and the challenges faced by major producers. The company's ability to navigate market volatility and maintain long-term confidence despite short-term setbacks is significant for investors and stakeholders in the sector.

Topalian acknowledged that prices have moderated and profits will be lower in the second quarter, but he emphasized that the steel products segment has been one of Nucor's strongest performers. "Our shareholders have made a lot of money because we invest for the long term," Topalian stated, adding that the company's best days are still ahead. He believes that while prices are softer and more moderate, this is not the time to "throw the baby out with the bathwater," and Nucor expects 2024 to be a very good year for the company.

Nucor returned over $1.1 billion to shareholders through dividends and share repurchases in the first quarter. The company also made progress on key capital investment projects, including its West Virginia sheet mill and Lexington, North Carolina rebar micro mill. Nucor continues to focus on sustainability, signing an agreement with Mercedes-Benz to supply Econiq RE steel made with 100% renewable energy and launching an initiative with Google and Microsoft to scale the adoption of clean energy technologies.

Looking ahead, Nucor expects earnings in the second quarter to decrease primarily due to lower average selling prices in the steel mills segment, partially offset by modestly increased volumes. The raw materials segment is expected to have higher earnings due to increased profitability of the company's direct reduced iron facilities and scrap processing operations. Topalian stated that demand remains stable or slightly improving in key markets like construction, automotive, energy, and service centers.

Key Takeaways

  • Nucor reported lower Q1 2024 earnings, but CEO expressed long-term confidence
  • Steel mills segment saw earnings growth, but steel products division declined
  • Nucor returned $1.1B to shareholders, made progress on capital projects
  • Nucor focused on sustainability, signed deals with Mercedes-Benz and tech firms
  • Nucor expects Q2 earnings to decrease due to lower steel prices, but demand stable