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.

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

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Killer Small Business Ideas

The 50 Best Personal Finance Blogs

Most Expensive Apartments in New York City

Bloodiest UFC Fights Ever Fought

Most Expensive Rum Brands in the World

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 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!