Nucor (NUE, Financial) is counting on couple of positive trends and strategic moves to boost its top as well as bottom line performance in 2015. These positive trends include favorable market condition in non-residential construction activities and encouraging automotive sector. Also its turnaround moves such as investment in Louisiana DRI plant, Skyline Steel LLC and Gallatin Steel should strengthen its operational results in 2015.
Factors that will drive growth
Additionally, the company is forecasted to gain remarkably from its acquisition of Skyline Steel LLC and Gallatin Steel. Nucor has recently purchased all the equity of Gallatin Steel. It paid $479 million in cash and issued around $300 million of commercial papers. This acquisition will certainly enable the company to have an edge in flat-rolled steel markets.Â
Moreover, its product diversity and low cost structures should attract many customers to its fold going forward. However, the continuous drop in the energy prices still remains a challenge for the company in 2015. This softness in oil and gas prices can impact its results in the non-residential construction market.
Nucor should benefit from the surge in the non-residential construction market. The industry data unveils that this division has advanced around 6.7% in 2014. Fortunately, the non-residential construction consumes more than half of Nucor production in the end-markets across the world. Looking ahead, the company expects continuous improvement in this sector that should drive its sales this fiscal year.
The strong demand for these products across the globe should help the company to offset softness in the energy market.
Also, the Skyline Steel acquisition should drive growth for its piling business. Skyline is the market leader in the piling business with an unreliable package of engineering support, stocking locations, processing centers and dedicated sales teams. Moreover, its T-trading capabilities should assist the company to capture a growing share of the market for value-added plate products going forward.
However, continuous drop in the oil prices could hurt its results. Yet, the company expects market place adjustment in energy market in late 2015. It is seeing positive local energy production in North America. Moreover, the company has an advantage of lower energy cost that should clearly support rising manufacturing activity and consumer spending. This in turn will drive growth for Nucor.
Conclusion
Nucor is making considerable investment on the operational front. Also, the favorable market trend in the non-residential construction activities should drive its results this fiscal year. The analysts expect its earnings to grow at CAGR of 18.27%, greater than average industry CAGR of 2.74% for the next five years. Hence, it offers tremendous growth prospects for the stock in the long-run. Also, it has solid short-term gains. Its earnings are forecasted to grow 24.80% this year and 27.40% by next year.
Moreover, the stock shares cheap valuation. It trades on the trailing P/E of 21.93 and forward P/E of 13.79 that indicate a lot of growth for the stock in the future. Also, its PEG ratio of 0.97 continues to support its growth over the years. Its balance sheet carries total cash of $1.12 billion and total debt of $4.58 billion. Nucor has operating cash flow of $1.34 billion and levered free cash flow of $455.95 million.
