Nucor Corporation (NUE) provided its first quarter 2010 earnings update, indicating it expected earnings per share to be in the range of a loss of 5 cents to earnings of 5 cents per share. The Zacks Consensus Estimate is pegged at net earnings of 2 cents in the first quarter. Nucor had reported a loss of 60 cents in the first quarter of 2008.

Nucor’s guidance is driven by higher expected operating rates at its beam and bar mills. The company is anticipating operating rates of 55% and 63% at its beam and bar mills, respectively, in the first quarter, up from 11% and 10% in the previous quarter. Nucor also foresees 85% and 90% utilization at its sheet and plate mills, up 22% each from prior quarter levels.

With improved utilization rates, Nucor expects production to climb 51% in the first quarter. Shipments are expected to be up 49%. The company’s scrap business under the Raw Material segment also showed significant improvement in the last reported quarter.

However, Nucor continues to see weakness in the residential and non-residential construction markets, with little sign of strength.

Recommendation Upgrade

We are upgrading Nucor from Underperform to Neutral. With operating rates up near peak levels on the beam product side and bar product operating rates also creeping higher, we believe that Nucor is well positioned to benefit from the ongoing recovery in steel fundamentals.

However, we remain wary of the company’s high long products exposure relative to others in the sector Incorporatedluding United States Steel Corporation (X), ArcelorMittal (MT) and Commercial Metals Company (CMC). We think it could be challenging for Nucor and other long products players to push through scrap surcharges on long products as end demand remains weak. The company’s relatively high construction exposure and lower leverage to improving steel prices is also a concern.

Nonetheless, we believe Nucor is well positioned with a good pipeline of organic investments and a very strong liquidity position.

Zacks Investment Research

1. (MCO) Nucor Downgraded by Moody’s Investors ServiceRecently, credit ratings agency Moody’s Investors Service (MCO) has cut Nucor Corporation’s (NUE) unsecured debt...
2. (NUE) Nucor Buys Ocala RecyclingSteel producer Nucor Corp.’s (NUE) subsidiary, the David J. Joseph Company, has bought Ocala Recycling...
3. (NUE) Nucor Corporation Moves from Loss to GainNucor Corporation (NUE) has revealed a profit of $58.9 million or 18 cents per share...
4. (NUE) Nucor Corporation Trims LossesNet losses for Nucor Corporation (NUE), the largest recycler of steel scrap in the US,...
5. (NUE) Nucor Corporation’s High-Cost Inventory Hurts EstimatesU.S.’s largest recycler of steel scrap, Nucor Corporation (NUE), has announced its guidance for its...
6. (NUE) – Nucor -of 30%, eclipsing the industry average of 20%Nucor (NUE) recently reported record second-quarter earnings of $1.94 per share, beating the consensus estimate...

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