Can Nucor Turn Steel into Gold?
Credit Suisse added Nucor to its U.S. Focus List on September 13, citing valuation and improving U.S. steel fundamentals.
"Tell me why you cried
and why you lied to me"
-Tell My Why (The Beatles)
It is Monday morning and I was up late last night watching the Yankees take the rubber game from the Red Sox of Boston. With 13 games left and 3 games up in the loss column in the Wild Card race, the picture is a lot brighter this morning then at any point during the year. Back to The Beatles for a moment. Released on July 10, 1964, "Tell Me Why" it is one of my favorite Beatles' tunes - more so for the simple yet cutting edge harmonies that would define the group for years to come.
Nucor (NUE) has not exactly lied to any of us over the last few months. Back on April 19, NUE told us to expect margin compression in some of its products as well as saying there were signs that things were slowing down. But although the market heard what the steel giant was saying, it chose not to listen and the stock continued its move higher, topping out at $69.93 in early June.
But the party came to an abrupt stop on June 11 when NUE gave 2Q EPS guidance of $1.05-$1.15 with Street consensus coming in anywhere between $1.39 and $1.42. Guess those folks should have listened as the stock "took the elevator down", bottoming out at around $45.50 or so on August 16.
However, something caught my eye last week and I think it is worth a careful look for my fellow Minyans. On September 12, Nucor gave 3Q EPS guidance of $1.10-$1.15 versus a Street consensus number of $1.26. Nucor went on to say that things were not all that stellar and in a word, things were "slowing". Well with that type of verbiage I was expecting another bloodletting in the stock. But I was surprised to see quite the contrary.
Nucor was trading around $52 when it made those comments and as this new week starts we find ourselves trading either side of $57. That, coupled with Credit Suisse adding Nucor to its U.S. Focus List on September 13, citing valuation and improving U.S. steel fundamentals, has me thinking for "a trade", Nucor is looking pretty interesting. I think we should be looking for another $5 or so of upside but think we should look to stop out of any long on a close below $54.50.
The price action of last week was, in the words of my very good friend Prof. Macke, "a great tell" and I think Nucor should be smack in the middle of my radar screen. Keep in mind, "Tell Me Why" is off the album "A Hard Day's Night", so an easy trade this will not be!
Check out a few more titles on Nucor by Professor Udall here and here.
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