Nucor Corporation NUE is set to release second-quarter 2020 results ahead of the bell on Jul 23. The impacts of the coronavirus pandemic and softer steel prices are likely to reflect on its results for the quarter.

The U.S. steel giant delivered an earnings surprise of 16.8%, on average, over the trailing four quarters. It posted an earnings surprise of 1% in the last reported quarter.

Nucor’s shares are down 27.6% year to date, compared with the industry’s 28.8% decline.

Let’s see how things are shaping up for this announcement.

Zacks Model

Our proven model predicts an earnings beat for Nucor this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earning beat.

Earnings ESP: Earnings ESP for Nucor is +3.15%. The Zacks Consensus Estimate for earnings the second quarter is currently pegged at 13 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Nucor currently carries a Zacks Rank #3.

What do the Estimates Say?

Nucor, last month, issued earnings guidance for the second quarter. It expects earnings per share between 10 cents and 15 cents for the second quarter. This reflects a rise from 7 cents in the first quarter of 2020 and a decline from $1.26 recorded in the year-ago quarter.

The Zacks Consensus Estimate for second-quarter consolidated revenues for Nucor is currently pegged at $4,119 million, reflecting a year-over-year decline of 30.1%.

Moreover, the Zacks Consensus Estimate for total steel mills shipments for the quarter currently stands at 5,100,000 tons, indicating a decline of 12.1% year over year. The consensus estimate for total tons shipped to outside customers is currently pegged at 5,549,000 tons, reflecting a decrease of 17.5% on a year-over-year basis.

The Zacks Consensus Estimate for average sales price per ton for the company’s steel mills unit stands at $648, suggesting a 17.8% year-over-year decline. The same for the steel products unit is pegged at $1,347, indicating a year-over-year decline of 7.9%.

A Few Factors to Watch

Results in the company’s steel mills unit are likely to be hurt by the impacts of the coronavirus pandemic. Nucor, last month, said that the pandemic affected its sheet and plate mills business in the June quarter due to weak oil and gas market activity as well as customer production disruptions.

Moreover, lower pricing for raw materials and the impact of an outage at the DRI (direct reduced iron) facility in Trinidad affected performance in the company’s raw materials unit. However, Nucor witnessed strong performance in its downstream steel products unit in the second quarter.

Meanwhile, weaker U.S. steel prices are likely to have hurt Nucor’s results for the second quarter. The coronavirus outbreak led to a downswing in domestic steel prices due to weak demand across major end-use markets like automotive and construction.

Coronavirus-induced lockdown restrictions affected industrial and economic activities globally, hurting demand for steel. The automotive industry, which consumes a big chunk of steel, is among the industries that were hit the hardest.

Softer domestic steel prices are likely to have exerted downward pressure on Nucor’s selling prices and hurt its revenues and margins in the to-be-reported quarter.
 

Stocks That Warrant a Look

Here are some companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Kinross Gold Corporation KGC, slated to release earnings on Jul 29, has an Earnings ESP of +1.96% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Newmont Corporation NEM, slated to release earnings on Jul 30, has an Earnings ESP of +11.11% and carries a Zacks Rank #3.

Barrick Gold Corporation GOLD, scheduled to release earnings on Aug 10, has an Earnings ESP of +1.37% and carries a Zacks Rank #3.

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