NUE Nucor
Best-in-class steel, but $245 prices near-peak spreads into a mid-cycle commodity business.
The story
Nucor is the lowest-cost, best-capitalized US steelmaker, and its scrap-based EAF model and downstream products give it a real but cyclical cost advantage. It is a mature business in a commodity industry, now recovering from a trough: TTM revenue is $36.1B against $32.5B last fiscal year, and TTM margin is 11.8% against 8.4%. Tariff protection and infrastructure demand support pricing, but rising input costs are already squeezing the Q3 outlook.
I raised Y1 growth from 4% to 6% (a material move) because TTM revenue is already about 11% above the last fiscal year and steel pricing improved in Q3. The 12% target margin is unchanged: it is a mid-cycle level, well below the 25% peak, and it matches TTM. The recovery confirms that assumption rather than justifying a higher one. Sales-to-capital, beta and the 8-year horizon stay the same, because a commodity producer whose cost edge is real but not a franchise moat does not earn a longer high-return period.
Value drivers
| Revenue growth (Y1) | 6.0% |
| Terminal growth | 2.0% |
| Forecast horizon | 8y |
| Target operating margin | 12.0% |
| Years to target margin | 5 |
| Sales-to-capital | 1.25 |
| Beta | 1.20 |
| Failure probability | 1.0% |
| Cost of capital (WACC) | 9.8% |
| Terminal WACC | 9.0% |
Valuation bridge
| PV of explicit FCFF | 14.76B |
| PV of terminal value | 27.16B |
| Equity value | 35.76B |
| ÷ shares → per share | $157.61 |
News
bearish -0.20 · 8 articles
- Nucor (NUE): Strong Shipments, but Q3 Guidance Raises Earnings Questions
- Cleveland-Cliffs Jumps 5% as Month-Long Rebound Extends; Nucor and Steel Dynamics Tick Up
- Nucor (NUE)’s Stronger Steel Prices Fail to Offset Rising Costs in Q3 Outlook
- Nucor Projects Higher Q3 Earnings on Improved Steel Pricing
- US Stock Market Today: S&P 500 Futures Edge Up As Rising Yields Test Growth
- Nucor’s EPS Is Forecast to Jump 60% in Two Years. Is NUE Stock Pricing That In?
- Will Softer Q3 Guidance and Steady Dividend Policy Change Nucor's (NUE) Investment Narrative
- Nucor (NUE) Could Be 12% Undervalued Following Guidance And Dividend Update
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 38.27B | 6.0% | 11.8% | 3.59B | 1.73B | 1.86B | 1.69B |
| 2 | 40.34B | 5.4% | 11.9% | 3.80B | 1.66B | 2.14B | 1.77B |
| 3 | 42.30B | 4.9% | 11.9% | 4.00B | 1.57B | 2.43B | 1.84B |
| 4 | 44.12B | 4.3% | 12.0% | 4.19B | 1.45B | 2.74B | 1.88B |
| 5 | 45.76B | 3.7% | 12.0% | 4.36B | 1.31B | 3.05B | 1.91B |
| 6 | 47.19B | 3.1% | 12.0% | 4.49B | 1.15B | 3.34B | 1.91B |
| 7 | 48.41B | 2.6% | 12.0% | 4.61B | 970.84M | 3.64B | 1.89B |
| 8 | 49.38B | 2.0% | 12.0% | 4.70B | 774.52M | 3.93B | 1.86B |
Key risks
- Steel price normalization if tariffs ease or imports surge
- Input cost inflation (scrap, energy) compressing spreads as the Q3 guidance flagged
- Heavy capex program earning below cost of capital in a downturn
Catalysts
- Sustained infrastructure and reshoring demand lifting utilization
- Buybacks at scale if free cash flow recovers