Nucor's Stock Down 22% in 6 Months: Should You Buy the Dip?

Core Viewpoint - Nucor Corporation (NUE) has experienced a significant decline in share price, losing 22.4% over the past six months, which is worse than the Zacks Steel Producers industry's decline of 17.2% due to a combination of demand slowdown and oversupply in the steel market [1][8]. Group 1: Stock Performance - NUE is currently trading at a 27% discount to its 52-week high of $203 reached on April 9, 2024 [3]. - The stock has been trading below the 200-day simple moving average (SMA) since May 22, 2024, indicating a bearish trend [1]. - The Zacks Consensus Estimate for 2024 earnings has been revised downward, with a projected decline of approximately 44.4% year-over-year [11]. Group 2: Market Conditions - U.S. steel prices have sharply declined from $1,200 per short ton at the beginning of 2024 to below $800 per short ton in March 2024, influenced by reduced demand and increased imports [8][9]. - The current prices are hovering around $700 per short ton, with expectations of continued pressure on profitability due to weak manufacturing and construction activities [9][10]. Group 3: Company Strategy and Financials - Nucor is investing $6.5 billion in eight major growth projects through 2027 to enhance production capacity and maintain its position as a low-cost producer [4]. - The company has spent $5.8 billion on acquisitions since 2020, including the recent acquisition of Southwest Data Products and Rytec Corporation, aimed at expanding its product portfolio [5]. - Nucor returned over $1.7 billion to shareholders through dividends and share repurchases in the first half of 2024, maintaining a commitment to return at least 40% of annual net earnings to shareholders [7]. Group 4: Valuation and Outlook - Despite the decline in share price, NUE is trading at a forward 12-month earnings multiple of 13.16X, which is a 45.7% premium to the peer group average of 9.03X [12]. - The company is advised to be held for now, as its expansion efforts may drive profitability, but it faces challenges from weaker steel prices and declining earnings estimates [16][17].