Shares of U.S. steel giant Nucor ( NUE 3.75% ) rose quickly out of the gate on April 21, gaining around 11% in the first 90 minutes or so of the trading day. The big news here was the company’s first-quarter 2022 earnings update, which investors seemed to have liked. That said, as the day wore on, and with the broader market in the red, Nucor gave back a lot of that big gain.
Nucor posted revenues of $10.49 billion in the first quarter of 2022, up a huge 50% or so from the same quarter in 2021, when it brought in $7.02 billion in revenues. The company’s sales slightly exceeded Wall Street estimates. On the bottom line, Nucor posted earnings per share of $7.67, up from $3.10 in the same quarter of 2021 and a new first-quarter record for the steel maker. Analysts had been expecting $7.35 per share. So Nucor beat on the top and bottom lines, something that is usually received very positively by investors.
That said, the news wasn’t all positive. For example, revenues were up just 1% from the fourth quarter of 2021, while earnings per share declined nearly 4%. The reason for the decline was that steel prices began to soften in the first quarter of 2022. A key highlight here was an increase in imported steel, which was a major industry headwind a few years ago. However, imported steel doesn’t appear to be the same risk it once was. Indeed, Nucor is currently predicting that second-quarter 2022 earnings will hit record levels, thanks to continued strong demand and steel price increases it has recently put in place. Geopolitical tensions appear to have strengthened the company’s hand on the pricing front, and management seems to be signaling that the price hikes could be a material benefit to second-quarter earnings.
The last few quarters have been exceptionally good for steel makers, and Nucor has been a prime beneficiary. It has been working to reward investors, too, noting last year’s huge 23% dividend increase and ongoing share buybacks (the steel maker repurchased 7 million of its own shares in the first quarter). All in all, the good news clearly outweighed the very modest bad news here and investors were right to be upbeat. The pullback from the daily highs was likely tied to the market’s broader weakness, which is being driven by big-picture issues like interest rate worries and the aforementioned geopolitical tensions — both of which could cause future performance to fall short of Nucor’s current expectations.
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