We came across a bullish thesis on Nucor Corporation (NUE) on Max Dividends’s Substack by Serhio MaxDividends. In this article, we will summarize the bulls’ thesis on Nucor Corporation (NUE). Nucor Corporation (NUE)’s share was trading at $123.08 as of Jan 15th. Nucor Corporation (NUE)’s trailing and forward P/E were 11.85 and 14.75 respectively according to Yahoo Finance.
Aerial view of a steel mill, showing the large scale production of the company’s steel.
Nucor Corporation, a steel industry pioneer with origins dating back to 1905, has evolved into the largest steel producer in the U.S. and North America’s top recycler. Originally named Reo Motor Company and later Nuclear Corporation of America, it shifted focus under F. Kenneth Iverson in the 1960s, adopting electric arc mini-mill technology. This process, reliant on scrap metal instead of traditional blast furnace methods, enhances environmental sustainability and ensures resilience across steel market cycles.
Renamed Nucor Corporation in 1972, the company is celebrated for its decentralized management, employee-focused culture, and 52-year streak of dividend increases, earning it the prestigious Dividend King status. This reflects its operational excellence and commitment to shareholder value, a rarity in cyclical industries like steel. Institutional investors, including Vanguard (8.5%) and BlackRock (7.8%), hold significant stakes, further cementing its market credibility.
Nucor stands out for its diversification into higher-margin specialty products like data center racks and industrial garage doors, which stabilize profitability beyond the cyclical steel market. Despite recent challenges, including a 15% year-over-year decline in Q3 2024 sales to $7.44 billion and a significant drop in net earnings, the company remains profitable with a manageable debt-to-equity ratio of 0.33. Its strategic use of downturns for acquisitions and asset investments positions it well for future growth.
Though noteworthy, competitors like Steel Dynamics and Reliance Steel & Aluminum lack Nucor’s Dividend King pedigree and long-term resilience. Nucor’s dividend yield is currently at 1.84% compared to its historical average of 2.41. Despite cyclical volatility, the company’s stock has consistently trended upward over the long term, supported by management’s adept capital allocation and operational efficiency.
Analysts project that Nucor’s stock is currently undervalued, estimating a potential upside of 30% to 35% with a median target price of around $156 per share. The recent 40% pullback offers an attractive opportunity for long-term investors. Nucor’s blend of stability and growth, despite its modest dividend yield, is supported by a proven track record, diversified product portfolio, and sustainable practices. This makes it a strategic addition for those seeking income and capital appreciation in the basic materials sector.
Nucor Corporation (NUE) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 32 hedge fund portfolios held NUE at the end of the third quarter which was 40 in the previous quarter. While we acknowledge the risk and potential of NUE as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NUE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.