Wednesday September 14, 2011
by Steve Christ, editor Wealth AdvisoryWith steel stocks already down 20 to 50% so far this year,
Nucor (
NUE) is on our buy list as a beaten down stock with upside as the push for greater infrastructure spending gathers steam.
The proposed infrastructure bank would sell construction bonds to pensions, endowments, hedge funds and other holders of big pools of cash.
Starting with a government infusion of $10 billion, the institution would then attract private investment several times this figure to finance the future upgrades.
As the largest U.S. minimill steelmaker, we think this plays to Nucor's advantage—especially since auto production is also expected to climb into the 4th quarter.
As a result, Nucor's sales and operating results likely bottomed in 2009 and will rise in 2011 and 2012 on a continued upturn in the demand for steel.
For fiscal year 2011, analysts estimate that NUE will earn $2.65 per share. Going forward, analysts estimate that NUE's earnings per share will grow by 34% in 2012 to $3.55 a share.
Currently trading with forward P/E of just 9.57, we believe Nucor is undervalued here. With a reasonable P/E ratio of 12.75, Nucor can easily trade for $45.26 per share representing 32% upside from here.
What's more, Nucor investors will also earn a 4.6% annual dividend along the way that is hard to beat. As a result, we continue to rate NUE as a buy below $35.
Learn more about this financial newsletter at Steve Christ's Wealth Advisory.
