Nucor Corporation (NUE) Earnings Got Nuked By Low Prices

Nucor Corporation (NYSE:NUE) earnings came out this morning, and the news was not good.

Nucor Corporation (NYSE:NUE)

Sales for the fiscal second quarter dropped nearly 9%, to $4.7 billion. Earnings, at $0.27 per diluted share, were down 23%, due primarily to the reduction in revenues, and exacerbated by an increase in monies spent on marketing, administrative, and other expenses.

Yesterday, rival mini-mill operator Steel Dynamics, Inc. (NASDAQ:STLD) reported weak pricing in its steel, and similarly eroded earnings.

At Nucor Corporation (NYSE:NUE), the steep slump in sales arose from a combination of factors. For one, shipments were down. Tons of steel shipped slipped 1% in comparison to last year’s Q2, owing to lower demand from customers. Adding to Nucor Corporation (NYSE:NUE)’s woes, and hurting Nucor earnings, the company noted that while steel prices have firmed up somewhat since Q1 of this year, they remain down 8% in comparison with last year’s Q2.

Result: Less steel shipped, and at far lower prices, added up to a 23% reduction in profit earned.

The future
Looking at the recent firming in prices, Nucor Corporation (NYSE:NUE) is telling investors that brighter days lie ahead. Management forecasts “modest improvement” in earnings on the back of higher prices for sheet steel — and it may be right about that.

You see, there are two main dynamics at play for companies like Nucor Corporation (NYSE:NUE) and Steel Dynamics, Inc. (NASDAQ:STLD), which rely on supplies of scrap steel to smelt their new steel. Scrap steel specialist Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) is also suffering from weak profits, which is bad news for it, but could be good news for Nucor, which views scrap steel as an input cost. Nucor says that “average scrap and scrap substitute cost per ton used in the second quarter of 2013 was $377 … a decrease of 12% from $427 in the second quarter of 2012.”

In a way, that’s good news for Nucor Corporation (NYSE:NUE) earnings, because it lowers its cost of doing business. On the other hand, weak scrap steel prices also suggest oversupply in the market, and weak demand for steel, period. And this could in turn put a lid (a steel lid, one suspects) on Nucor’s hopes for improvements in steel pricing in Q3.

Next up
Looking for more clarity on where the steel market is heading? United States Steel Corporation (NYSE:X) is next in line to report earnings, on July 30. After that, it will be Luxembourger steelmaker ArcelorMittal (ADR) (NYSE:MT), probably reporting in August. Stay tuned.

The article Nucor Earnings Got Nuked By Low Prices originally appeared on Fool.com and is written by Rich Smith.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Nucor. The Motley Fool owns shares of ArcelorMittal.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!