Nucor will report a new record for first-quarter earnings on April 21. The company earned $6.83 billion in 2021, nearly triple its previous record, and it came on the heels of a record year in 2019. The company more than tripled earnings per share thanks to a steady stream of share purchases.
The top and bottom lines of steelmakers like Nucor were helped by supply-and-demand dynamics. Its stock price increased last year. With steel prices back up after a drop-off that began in the fourth quarter, investors should examine whether Nucor can offer market-beating returns again in the future.
Nucor is the image source.
Nucor has been investing in its business for long-term gains like stock investors look to build their retirement portfolios. The company has made growth investments over the past five years.
Nucor is the image source. The chart is by an author.
It has spent over $9 billion on acquisitions and new growth projects in the last five years, and many of them are now in operation. There were two rebar micro mills in Missouri and Florida. The company recently announced it would spend another $350 million to build a third in North Carolina.
These projects take a long time to build and bring into full operation. The company has the capacity to increase its sales and shipments to outside customers because of its steady commitment to growth.
| Metric | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | 2015 |
|---|---|---|---|---|---|---|---|
| Net Sales (in billions) | $36.5 | $20.1 | $22.6 | $25.1 | $20.3 | $16.2 | $16.4 |
| Tons of steel sold* (in millions) | 28.3 | 25.5 | 26.5 | 27.9 | 26.5 | 24.3 | 22.7 |
Tons were sold to other people. The data source is Nucor.
The production capacity will increase as the new facilities come online. With ample cash flow, Nucor should be able to continue investing at a strong pace while still returning plenty of capital to shareholders.
When the company reports its Q1 earnings later this month, it may well forecast that earnings will fall in 2022, compared to last year&s record result. Even if it delivers its best-ever first-quarter numbers, it wouldn't be surprising considering that steel prices are 25% below last year's peak. Any sell-off by investors disappointed at that prospect would be an opportunity to buy based on Nucor's cash flow, new projects coming online, and future profit potential.
Even without a new earnings record, 2022, will be a strong year that dwarfs past years. On top of the investments that are growing the business, management will likely remind shareholders how much has been returned to them through dividends. Nucor raised its dividend by 23% in the year 2021. This will be the 50th year in a row that the company has raised its payouts, earning it a spot on the list of Dividend Kings.
Some traders try to buy and sell around the troughs and peaks of the sector. Long-term investors in Nucor should be able to add to their positions if the stock drops later this month because the company has plenty of growth ahead.
Howard Smith owns Nucor and has the following options: short May 2022 $160 calls on Nucor. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. score=28.625>Howard Smith has options on Nucor. The stocks mentioned have no position in The Motley Fool. There is a disclosure policy for The Motley Fool.
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