Nucor’s third-quarter shipments hit a record high, with downstream operations and automotive orders opening up room for growth
Steel mills and downstream operations jointly supported third-quarter earnings, but fourth-quarter maintenance, ramp-up costs at a new mill and weakness in the raw materials business pose constraints. JPMorgan raised its earnings forecasts and price target, citing diversification and new capacity.
Original source：J.P. MorganFirst published on Unhidea：Original source date：
Key takeaway
JPMorgan believes Nucor’s downstream products, automotive opportunities and new capacity could support future earnings, although it must still absorb a seasonal decline in shipments and the cost of ramping up a new mill in the near term.
What enabled third-quarter results to meet high expectations?
Nucor’s third-quarter adjusted EBITDA was 2.3 billion dollars, in line with expectations; adjusted earnings per share were 5.80 dollars, 4% above the company’s mid-quarter guidance. The steel products and raw materials businesses performed better than JPMorgan expected, while the steel mills business was broadly in line with the bank’s expectations.
Steel mill shipments set a record for the third consecutive quarter, rising 14% year over year; profit per ton increased by 41 dollars from the previous quarter. Capacity utilization, however, fell 2 percentage points quarter over quarter to 89%.
Downstream shipments rose 20% year over year, and profit per ton increased by 67 dollars quarter over quarter; within the segment, tube shipments grew 82%. Raw materials earnings fell from the previous quarter as prices and shipments weakened.
Third-quarter free cash flow was approximately 1.6 billion dollars, the highest since the third quarter of 2023; the free cash flow yield, annualized at the quarter’s level, was approximately 10.5%.
Why could fourth-quarter earnings be flat or slightly higher?
The company guided for fourth-quarter earnings to be flat or slightly higher than in the third quarter: the steel mills and steel products businesses are expected to remain stable, with higher product prices partly offsetting the impact of 5 to 6 fewer shipping days; the raw materials business and corporate-level eliminations are expected to weaken.
Management reiterated its target of 10% year-over-year shipment growth for full-year 2026. On that basis, JPMorgan estimates that the seasonal decline in fourth-quarter shipments will be more pronounced amid the impact of planned maintenance.
Steel mill prices are expected to improve, but the ramp-up of the new West Virginia mill, higher scrap costs and lower shipments will also add pressure. The mill completed its first steel production in September, and the project remains on schedule and on budget.
Which businesses will drive new growth?
The company said it had secured a share of supply for exposed parts on future General Motors vehicle platforms, applications currently dominated by integrated steelmakers. JPMorgan sees this as an opportunity for Nucor to expand its automotive business in the future.
Downstream operations are supported by demand from energy infrastructure, data centers and border wall construction, among other areas. Data centers account for approximately 15% of the company’s total order backlog and 5% of shipments; the bank expects demand from them to continue growing in 2027.
Hot-rolled coil prices have risen 13% over the past three months, and JPMorgan believes the supply-driven rally could continue through the end of 2026. Imports are also rising, reaching their highest level since March 2025 in September 2026; investors are also concerned that prices are nearing a peak and that rising interest rates will affect future demand.
Why did JPMorgan raise its price target?
The bank raised its forecast for fourth-quarter 2026 adjusted EBITDA by 4% to 2.3 billion dollars, mainly reflecting improved steel products pricing; it raised its 2027 forecast by 3% to 9.2 billion dollars, 11% above Bloomberg consensus, based on stronger downstream earnings and the lagged benefits of higher steel mill prices.
JPMorgan maintained its overweight rating and raised its December 2027 price target from 296 dollars to 304 dollars. Its valuation uses a 2028 expected enterprise value-to-EBITDA multiple of 8.5 times, above the historical five-year average of approximately 7 times; the bank values trade protection, higher capacity utilization and product diversification.
The bank also expects free cash flow to improve after capital spending peaks: capital expenditure in its model falls from 2.486 billion dollars in 2026 to 1.7 billion dollars in 2027, while adjusted enterprise free cash flow rises from 3.858 billion dollars to 5.064 billion dollars.
