Nucor (NUE), a major steel producer, is trading modestly higher today after reporting Q1 results this morning. Non-GAAP EPS came in at a robust $1.55, well ahead of above prior guidance of $1.45-1.50. Revenue rose 9.5% yr/yr to $6.10 bln, which was modestly above market expectations.
Nucor typically guides in the middle of the last month of the quarter (so mid-March this time) and it is usually pretty spot-on with their final result. So, the large EPS upside was a nice surprise and a bit unusual for Nucor. However, that trend may be changing as Nucor has now done this for two quarters in a row, which tells us perhaps management is getting more conservative in their guidance or results are just coming in stronger than expected.
The Q1 results were impacted by lower average selling prices/margins for sheet. In addition, NUE cited "unusually challenging winter conditions delayed shipments to certain construction customers of the company's steel mills." While finished steel is the main part of Nucor's business, it also has a sizeable raw materials segment. That segment saw a sequential decline in Q1 relative to Q4 due "primarily to margin compression in Nucor's DRI businesses, which has experienced declining average selling prices since Q4."
Investors are always closely attuned to what Nucor will say about its outlook. Nucor is seen as the main bellwether in the steel industry, so its commentary is closely followed. Nucor says "the performance of the steel mills segment in Q2 is expected to be consistent with Q1 as weakening margins for sheet and plate...are expected to be offset by improving margins for structural and bar mill products."
Nucor does not typically provide specific guidance for the next quarter until late in the quarter, so expect more specific numerical guidance for Q2 in mid-June. However, Nucor does say it expects earnings to be similar to Q1. If that's the case, the $1.55 would be a bit below market expectations. But keep in mind that Nucor is guiding for earnings, not EPS, and since we do not know the share count, we should not assume an exact $1.55. However, it's likely to be in that ballpark as NUE's share count does not shift dramatically from quarter to quarter.
In sum, this was a solid quarter for Nucor and they sound positive about Q2 and 2019 although there is not a lot of detail in the press release. The Nucor call starts at 2pm ET if you want more data about the quarter. Nucor tends to be refreshingly candid on its earnings calls. Its rival, Steel Dynamics (STLD), reported decent results yesterday although the stock traded lower. However, Nucor's upside EPS was more impressive. Looking ahead, US Steel (X) is set to report next week (May 2 after the close). This report bodes well for them.