Tuesday, November 18, 2014

Nucor (NUE) 2014 Review


Nucor Corp is a manufacturer of steel and steel products (hot rolled steel shapes and cold finished bars, joists and deck) utilizing scrap, electric furnaces, continuous casters and automated rolling mills.  While the company is highly susceptible to economic conditions, it nonetheless the company has grown earnings and dividends at an 18-20% pace over the last 10 years earning a return on equity as high as 35%.  It should continue to generate an above average return over the course of an economic cycle because:

(1) very diversified client and geographic base,

(2) highly variable cost structure,

(3) an aggressive acquisition program (latest: Skyline Steel) that concentrates on purchases that is accretive via new cost saving technologies or add-ons to its product line,

Negatives:

(1) continued sluggish global economic growth, especially in Europe which is NUE’s largest market,

(2) surging imports,

(3) it is in a highly competitive industry.

Nucor is rated A by Value Line, carries a 36% debt to equity ratio and its stock yields 2.8%.

Statistical Summary

                 Stock      Dividend         Payout      # Increases  
                 Yield      Growth Rate     Ratio       Since 2004

NUE          2.8%            6%             50%            10*
Ind Ave      2.3               7                36               NA 

                Debt/                        EPS Down       Net        Value Line
                Equity         ROE      Since 2004      Margin       Rating

NUE         36%            12%            4                4%           A
Ind Ave     37                7              NA              4             NA

*NUE pays bonus dividends which distort the dividend statistics.

          Chart

            Note: NUE stock made good progress off its November 2008 low, surpassing the downtrend off its May 2008 high (straight red line) and the November 2008 trading high (green line).  Long term it is in an uptrend (blue lines), though it has challenged the lower boundary of that trend several times in the last two years.  Intermediate term, it is in an uptrend (purple lines).   The wiggly red line is the 50 day moving average.  The Dividend Growth Portfolio owns a full position in NUE.  The stock is currently on the Dividend Growth Buy List.  The lower boundary of its Sell Half Range is $113.




11/14

No comments:

Post a Comment