Why Nucor Stock is up 11% in early trading today

What happened

Shares of the American steel giant Nucor (NUE 3.75% ) quickly exited the gate on April 21, gaining around 11% in the first 90 minutes or so of the trading day. The big news here was the company’s first quarter 2022 earnings update, which investors seemed to have appreciated. That said, as the day progressed and with the broader market in the red, Nucor returned much of that big gain.

So what

Nucor reported revenue of $10.49 billion in the first quarter of 2022, up about 50% from the same quarter in 2021, when it generated $7.02 billion in revenue. The company’s sales slightly exceeded Wall Street estimates. In the end, Nucor posted earnings per share of $7.67, down from $3.10 in the same quarter of 2021 and a new first-quarter record for the steelmaker. Analysts were expecting $7.35 per share. Nucor therefore beat on the top and bottom results, which is generally received very positively by investors.

Image source: Getty Images.

That said, the news isn’t all positive. For example, revenue rose just 1% from the fourth quarter of 2021, while earnings per share fell nearly 4%. The reason for the drop is that steel prices started to soften in the first quarter of 2022. A key point to highlight here is an increase in imported steel, which was a big industry headwind. few years ago. However, imported steel does not appear to be the same risk it was. Indeed, Nucor is currently predicting that second-quarter 2022 earnings will hit record highs, thanks to continued strong demand and rising steel prices it recently introduced. Geopolitical tensions appear to have strengthened their hand on the pricing front and company management appears to be signaling that higher prices could be a significant benefit to second quarter earnings.

Now what

The past few quarters have been exceptionally good for steelmakers and Nucor has been a major beneficiary. He’s worked to reward investors, too, noting last year’s huge 23% dividend increase and ongoing share buybacks (the steelmaker repurchased 7 million of its own shares in the first trimester). Overall, the good news clearly outweighs the very modest bad news here and investors have reason to be optimistic. The pullback from the daily highs was likely related to broader market weakness, which is driven by big-picture issues like interest rate worries and the geopolitical tensions mentioned above – both of which could make future performance to fall below Nucor’s current expectations.

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