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Employees watch as steel is cooled in the roll mill at a Nucor plant in Darlington,in 2003. (Heidi Heilbrunn/Associated Press/Heidi Heilbrunn/Associated Press)
Employees watch as steel is cooled in the roll mill at a Nucor plant in Darlington,in 2003. (Heidi Heilbrunn/Associated Press/Heidi Heilbrunn/Associated Press)

Nucor expects second-quarter profit jump Add to ...

Steelmaker Nucor Corp. said Wednesday it expects second-quarter earnings to jump on real improvement in demand in several key industrial sectors, but the forecast still missed Wall Street expectations.

The company's stock slipped 1 per cent to $40.29 (U.S.) in morning trading on the New York Stock Exchange.

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"Our profitability has significantly improved from the first quarter to the second quarter, as price increases for steel mill products caught up with higher raw material costs," the company said in a statement.

It said markets such as automotive, heavy equipment, energy and manufacturing showed real demand improvement.

Nucor said it expects second-quarter earnings of 75 cents to 80 cents per share, compared with 29 cents per share in the same quarter last year.

It noted that projected second-quarter results include an estimated inventory accounting charge of $31-million, or 6 cents per share.

The forecast was slightly below Wall Street's target. Analysts on average were expecting earnings, including the accounting charge, to be 87 cents per share, according to Thomson Reuters I/B/E/S.

Analyst Mark Parr, of KeyBanc Capital Markets, said that although Nucor's estimate was below the consensus, it compared favorably to the first-quarter's adjusted operating earnings of 50 cents per share.

He noted the improvement was driven by higher finished steel pricing, which had previously lagged the upward movement in scrap and pig iron prices.

"We feel a neutral to mildly positive reaction to this morning's release is warranted, as macro concerns have already hit steel equities since reaching April highs," Mr. Parr wrote in a note to clients.

"Comments indicating continuation of stable order patterns into the third quarter may even help ease recent macro concerns," he added.

Leo Larkin, an analyst with S&P Equity Research raised Nucor's investment rating to "buy" from "hold." He maintained full-year earnings estimates for 2011 and 2012 and the 12-month stock price target of $52.

"After a recent sharp drop, we think Nucor is attractively valued, trading well below our target price," Mr. Larkin wrote.

 

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