Nucor Corporation NUE slipped below its 50-day simple moving average (SMA) on March 17, 2025, and is currently trading below that level. NUE has also been trading below the 200-day SMA since Nov. 7, 2024. Following a death crossover on June 20, 2024, the 50-day SMA continues to read lower than the 200-day SMA, indicating a bearish trend. 

NUE Stock Trades Below 50-Day SMA

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NUE stock has seen a 32.9% decline in its share price over the past year. The downside reflects the choppiness in the steel space, which was exacerbated by the significant pullback in U.S. steel prices, resulting in a dent in its profitability. NUE has underperformed the Zacks Steel Producers industry’s 19.4% decline and the S&P 500’s rise of 9.1%. Its major U.S. steel-making peers, Steel Dynamics, Inc. STLD and Cleveland-Cliffs Inc. CLF have lost 11% and 54.3%, respectively, while United States Steel Corporation X has gained 5.1%, over the same period. 

Nucor’s One-year Price Performance

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Nucor’s shares are trading roughly 36% below its 52-week high of $203, reached on April 9, 2024.

Let’s take a look at NUE’s fundamentals to better analyze how to play the stock amid the recent price decline.

Strategic Growth Investments to Aid Nucor Stock

Nucor remains committed to boosting production capacity, which should drive profitable growth and strengthen its position as a low-cost producer. The company has already commissioned some of its growth projects with Gallatin and Brandenburg mills, showing strong production and shipment performance. NUE is investing $6.5 billion in eight major growth projects through 2027. These include the Apple Grove, WV, sheet mill (the largest project), the Lexington, NC, rebar micro mill and the Pacific Northwest rebar micro mill.

The company has been focusing on growth through strategic acquisitions over the past several years. The recent acquisition of Southwest Data Products expanded its growing portfolio of solutions for data center customers. The buyout of Rytec Corporation will also allow Nucor to further expand beyond core steelmaking businesses into related downstream businesses. Adding high-performance doors is expected to create cross-selling opportunities with other Nucor businesses and significantly expand its product portfolio for the commercial space.

Strong Financial Health Backs NUE’s Capital Allocation

Nucor is maximizing its returns to shareholders by leveraging its strong balance sheet and cash flows. It ended 2024 with strong liquidity, including cash and cash equivalents and short-term investments of around $4.1 billion.  It also generated cash from operations of roughly $4 billion in 2024. NUE returned around $2.7 billion through dividends and share repurchases last year. It has returned around $12 billion to its shareholders through dividends and share repurchases since 2020, accounting for 57% of its net earnings. The company, in December 2024, raised its quarterly dividend to 55 cents per share from 54 cents. Nucor has increased its regular dividend for 52 straight years since it started paying dividends in 1973. It remains committed to returning at least 40% of annual net earnings to shareholders.  

NUE offers a dividend yield of 1.7% at the current stock price. Its payout ratio is 25% (a ratio below 60% is a good indicator that the dividend will be sustainable), with a five-year annualized dividend growth rate of 8.2%. Backed by strong financial health, the company's dividend is perceived to be safe and reliable.

Lower Steel Selling Prices Mar NUE’s Prospects

A significant downward correction in steel prices weighed on Nucor’s bottom line in 2024 and largely contributed to the downward slide in its stock. U.S. steel prices declined sharply last year due to a slowdown in end-market demand and oversupply after a strong run in late 2023 that extended into early 2024.

Benchmark hot-rolled coil (HRC) prices tumbled more than 40% last year from $1,200 per short ton at the start of 2024. The downside was due to a combination of factors, including a pullback in steel mill lead times, an oversupply of steel exacerbated by increased imports, reduced demand from key industries and economic uncertainties. Sluggish industrial production and construction activities also contributed to the decline. 

A slowdown in global automotive production curtailed steel consumption in this key end-market in 2024. The construction sector experienced a slowdown in the United States due to high interest rates, which dampened steel demand in this market. Elevated borrowing costs and inflation took a bite out of the residential construction industry. Manufacturing activities also weakened amid softening demand for goods and higher borrowing costs. Despite some green shoots of recovery in manufacturing and construction, a significant demand rebound for steel is unlikely over the near term.

The recent steel mill price hikes and the Trump administration's imposition of a 25% tariff on all steel imports into the United States have led to an uptick in HRC prices lately. However, a significant recovery is not expected over the near term, given the weak manufacturing backdrop and a still-challenging demand environment. 

Lower steel selling prices hurt Nucor’s performance in the fourth quarter of 2024. NUE, on its fourth-quarter call, said that it expects a sequential decline in realized prices across its steel mills and steel products segments in the first quarter of 2025, suggesting continued pricing pressure.

Nucor’s Valuation Looks Stretched

Despite the downside in its share price, Nucor is currently trading at a forward 12-month earnings multiple of 14.79X, a roughly 35% premium to the peer group average of 10.97X, and higher than its five-year median.

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NUE’s Earnings Estimates for FY25 Going Up

The Zacks Consensus Estimate for NUE’s 2025 earnings has been revised upward over the past 30 days. The consensus estimate for the first quarter of 2025, however, has been revised down over the same time frame.

Find the latest earnings estimates and surprises on Zacks Earnings Calendar.

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Conclusion: Hold NUE Stock for Now

Nucor benefits from its actions to expand its production capabilities and grow its business through strategic acquisitions. Its efforts to boost production capacity through several growth projects should drive profitability. Despite these positives, NUE remains exposed to the underlying challenges in the steel industry that have led to its underperformance. Lower steel selling prices cast a pall on the company's prospects. Its stretched valuation also might not offer an attractive entry point at this time. Holding onto this Zacks Rank #3 (Hold) stock will be prudent for investors who already own it.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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This article originally published on Zacks Investment Research (zacks.com).

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