Start of the Day with Chris Forte – Nucor

Posted on July 28, 2022 by Scott Shuda

I’m a small-cap and micro-cap guy, but when a large cap punches me in the face with a steel fist I pay attention and take a position.

Nucor Corporation (NUE) is the best steel company this country has and it’s at a bargain price. Shares closed yesterday at $127, but the shares have swung wildly over the last year with highs and lows of $188 and $88.

Last week NUE reported an excellent quarter, their best numbers ever, You’d think the analysts would be pounding the table but instead they worry earnings will falter along with the economy. Even if we have a mild recession it’s ridiculously cheap selling at 4x earnings.

CEO Leon Topalian is very optimistic. “The analysts keep getting it wrong” He thinks they are hung up on the past history of the industry and not seeing the future. “Look at our beat. At $9.67 per share of earnings it is an industrial company growing in spaces that offer more resiliency from the traditional steel making.

“We’re optimistic. We have an amazing customer base. Our order book is as strong as it’s ever been.”

Q2 EPS of $9.67 beat by $1.07 and revenue of $11.79B (+34.1% Y/Y) beat by $200M.

“”As we enter the third quarter, demand remains stable and resilient across the major end-use markets we serve, and customer inventory levels appear right-sized relative to economic conditions. Though we expect a decrease from the record-setting second quarter, we expect another strong quarter of profitability in the third quarter of 2022. We believe that 2022 will be the most profitable year in Nucor’s history,” said Topalian.

“Look at the indicator lights out there. Too many are reading headlines and not our balance sheet, our income statement, our cash flow. We’ve generated $5B of cash from operations through the first half of the year. It’s unbelievable. The rest of the year we expect to be a record.”

“The automotive sector is really hungry for us to get our West Virgina mill up and running to produce steel panels they need today – it’s the cleanest steel anywhere in the world.

“Our Brandenburg, KY mill will be the only one in the Western Hemisphere capable of producing steel for the off shore wind market. It’s exciting. It’s massive.”

NUE recently bought C.H.I. overhead door company. “C.H.I. is flipping the market on its head. It has grown CAGR 10% a year for 20 years. It’s a steel centric business and couples perfectly with us. They will be the most profitable overhead door company in the world.”

It’s a perfect marriage. “Nucor buildings group does 10,000 buildings annually. Every one of those buildings has somewhere between 4 and 15 doors.”

“We are going to grow in ways few expect. Nucor has to be viewed differently than a 3x or 4x company. We should be in the 9-12x range. Our returns are going to prove that.”

If you think we are going to have a mild recession or dodge it completely NUE is one to consider but if we fall into a deep recession investors might jump ship. For me it’s a good undervalued, cash generating, growth story and infrastructure bet on America.

________

QUICKIES

*The Dow closed up 436, the NASDAQ 100 up 4.3%, the ARKK inverse ETF SARK got hammered down 7%, and NFL training camps opened. Was that a fun day or what?
*Antero Resources (AR) $2.29 eps beat by $0.45, revenue of $2.2B beat by $380M, and they reduced debt by $383M.
*Brad’s Monthly Elite Call Recording 7-26-22 is out on the Feed. It’s 54 minutes of Bradley Steveson updating the companies he covers. Pull up a chair and enjoy.
*Scott Shuda lays out “Environmental Concerns Likely to Impact Food Prices”
Tiffany Drives Strong Jewelry Sales at LVMH” is posted by Alex Bailao pertaining to Diamcor Mining (DMIFF). It’s chocked full of diamond insights.

“The first time I heard it, you know, I’m running out to the field and everybody’s saying ‘Cruz’ and I’m thinking it’s ‘boos,’ and I’m looking like, ‘What did I do wrong? Is my zipper down?'” — VICTOR CRUZ, NY Giants

Good luck to all – Chris

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