On Monday, UBS upgraded shares of Nucor Corporation (NYSE:NUE), a leading steel manufacturer with a market capitalization of $29.6 billion, from Neutral to Buy. The firm also increased the price target (PT) on the stock to $160 from the previous $156. According to InvestingPro data, the company maintains a GOOD financial health score and has demonstrated strong shareholder commitment through aggressive share buybacks. This upgrade comes after observing a decrease in the stock’s valuation since early December, noting that it has de-rated to approximately 7.5 times UBS’s estimated 2025 earnings before interest, taxes, depreciation, and amortization (EBITDA) from around 9 times. Currently trading at an EV/EBITDA multiple of 7.31x and a P/E ratio of 14.32x, InvestingPro analysis suggests the stock is undervalued relative to its Fair Value, presenting a potential opportunity for investors.
UBS analysts have pointed to the recent rally in steel prices following the announcement of 25% Section 232 steel tariffs. While the firm anticipates that steel prices may decline in the second half of 2025 after the initial panic buying subsides, they also recognize potential benefits from the tariffs. The level of import protection provided by the tariffs, which could increase for specific countries, was higher than UBS’s initial expectations in December.
Despite concerns about the unpredictable U.S. trade policy potentially impacting demand, UBS remains optimistic about medium-term hot-rolled coil (HRC) prices staying above $800 per short ton. This confidence is supported by a cost curve elevated by scrap prices and year-to-date import parity, even if demand decreases further.
The analysts also highlighted that the turnaround in the plate market is due to higher import parity, and Nucor’s Products business is likely to gain from the 25% tariffs on downstream goods. With Nucor’s medium-term growth prospects and near-term earnings momentum, coupled with the recent de-rating, UBS sees a compelling case for upgrading the stock to Buy. Adding to the investment thesis, InvestingPro data reveals the company has maintained dividend payments for 53 consecutive years and offers a current dividend yield of 1.8%. For deeper insights into Nucor’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Nucor Corporation has projected lower earnings for the first quarter of 2025, with expected earnings per share (EPS) ranging between $0.45 and $0.55. This guidance falls short of analysts’ expectations of $1.05 and includes one-time charges of about $16 million due to facility closures. Despite the weaker-than-anticipated guidance, Citi analyst Alexander Hacking maintained a Buy rating on Nucor with a $160 price target, citing potential support from updated tariffs and future demand. Nucor has also been actively returning value to shareholders, repurchasing approximately 2.3 million shares at an average price of $133.17 and distributing around $428 million through share repurchases and dividends.
Additionally, recent tariff announcements by President Donald Trump, imposing a 50% tariff on Canadian imports, have seen Nucor shares rise by 1.5%, as investors anticipate potential benefits for domestic producers. In corporate developments, Nucor announced the retirement of Executive Vice President Gregory J. Murphy, with Benjamin M. Pickett and Douglas R. Wilner set to assume new executive roles. These leadership changes reflect Nucor’s focus on strategic growth and corporate governance. As the company navigates these developments, its financial performance and market strategies will continue to be closely monitored by investors and analysts alike.
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