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Nucor (NUE): Turnaround in steel?
By Sy Harding, editor The Long and Short Stock Advisor
It has suffered from the recession as manufacturing and construction has plummeted. From earnings per share of $4.98 in 2007, and $6.01 in 2008, Nucor swung all the way to a loss of $1.13 a share in the first nine months of this year on a big 58% plunge in revenues. With the economy recovering and Washington embarked on efforts to produce jobs, which includes focusing on road and bridge upgrades and expansion, the steel industry is probably due to pull out of its down cycle. 
Meanwhile, the industry-wide slump in demand has run U.S. steel inventories to a historically low level according to the Metals Service Center Institute. Nucor has been successful in cutting its costs enough that quarterly losses were at their worst in the first quarter of the year, at $.60 a share, and have been less with each subsequent quarter, the company losing only $.10 a share in its September quarter. The company recently said it expects to break the pattern of three quarterly losses with a 'breakeven to slightly positive' performance this quarter. Meanwhile, research firm Value Line is forecasting a return to slight profitability in the current quarter, $3 a share for the full year next year, and a return to aggressive long-term growth and earnings of $8 a share in the 2012-2014 period. Nucor has a history of building steel mills inexpensively and operating them very efficiently with a well-paid but mostly non-union work force. The company has a very strong balance sheet, with a high level of cash, which has allowed its success with acquisitions to continue, as it also continues to take market share away from less efficient competitors. On the technical analysis side, Nucor is rising off a trendline of support at the bottom of a rising trading band. It has just broken out above its 20-week moving average. MACD, which has provided quite timely buy and sell signals in the past, has triggered a new buy signal. And the stock‟s Internal Strength Index is rising and still has quite a ways to go if it is headed for its overbought zone. We believe Nucor is a worthwhile turnaround play, provided the economy continues to recover. We have an upside target of 60, and suggest a mental protective stop at 38.50. Learn more about this investment newsletter at The Long and Short Stock Advisor. |
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Nucor Corp. (NYSE: