Nucor Corporation (NUE: 44.35 +0.73 +1.67%), the nation’s largest recycler of steel scrap, is suffering from continued low operating rates and high-cost pig iron inventories. Moreover, a slowdown in demand from the automobile sector and increased production in China are matters of concern.
Long-term contracts, cost reduction efforts and a dominant acquisition strategy could be positives in the company’s performance in the coming quarters. Nucor’s strong balance sheet positions the company well for the long term, but the near-term headwinds in the end-markets are likely to make it difficult for the stock to outperform.
As such, we downgrade Nucor to Underperform from our previous Neutral recommendation.
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