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Current Stock Facts (NUE)

Current Stock Facts (NUE). Stock Price 55.62 Market Capitalization 8.7B Beta1.64 EPS 7.02 DPS 0.6 P/E 6.3% Dividend Yield 1.1% Dividend Payout Ratio 9% Required Rate of Return14.8% ROE 43.8% Forecasted Growth Rate 39.8%. Company Profile. Steel manufacturing company

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Current Stock Facts (NUE)

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  1. Current Stock Facts (NUE) • Stock Price 55.62 • Market Capitalization 8.7B • Beta1.64 • EPS 7.02 • DPS 0.6 • P/E 6.3% • Dividend Yield 1.1% • Dividend Payout Ratio 9% • Required Rate of Return14.8% • ROE 43.8% • Forecasted Growth Rate 39.8%

  2. Company Profile • Steel manufacturing company • Divided into two segments • Steel mills • 17 Mills • Steel products • 4 Divisions

  3. Nucor Overview • 47 Operating Facilities in 15 states • 11,000 employees generated $11.4 billion in 2004 sales and 19.5 million tons of 2004 steel shipments • Corporate Staff of about 60 Employees • Largest recycler in the United States

  4. 2.00 0.25 1.7 .22 1.80 0.20 1.60 1.40 0.15 1.20 1.0 .12 GGE (t CO2 equiv/t) 1.00 EnergyConsumed(GJ/t) 0.10 0.80 0.60 0.05 0.40 .2 .02 0.20 0.00 0.00 Energy & Emissions(ladle through hot band)

  5. Nucor Overview Key Facilities: Vulcraft (Joist/Deck - 7) Bar Mill Group (9) Sheet Mill Group (4) Structural Mills (2) Plate Mill (2) Cold Finish Group (4) Building Systems Group (3) Fastener Division (1) Nucon (2) • Nucor – North America’s largest steel producer in 2004.

  6. Diversified Product Mix 2004 Sales Tons

  7. Diversified Product Mix End Use Markets

  8. Management • Ceo – Daniel R. DiMicco • 3-tiered management • G.M., Department M., Supervisor • Performance based compensation

  9. Nucor’s Growth Strategy Nucor is in a position of strength to execute our cyclical growth strategy--- 1.Optimize existing operations 2. Use innovation to capitalize on new technologies 3. Pursue strategic acquisitions 4. Grow globally through joint ventures

  10. Trend Analysis Graph • NUE • Industry • S&P

  11. EPS Estimates

  12. Industry Comparison

  13. Fundamental Valuation • Future Div. w/ Constant Growth • .06 (1+ .3985) = .0839 • Value using Constant Growth • .0839/ (.08-.3985) = - .26 • Est. of Growth Rate • (1- .09) .4379 = .3985

  14. Summary: Pros • Steel prices bottomed in mid-2005 at a level that should allow Nucor to comfortably generate profits. Both the company and the industry scaled back production and avoided an outright collapse of the market. • As one of the three big boys in the domestic steel industry, Nucor can dictate pricing terms. For instance, the company was able to pass on a scrap surcharge in late 2003 and 2004. • Nucor has a history of exiting difficult periods much stronger than going in, and this time is no different. The firm recently increased capacity for sheet (30%) and bar (50%) steel at a fraction of the cost to build. • Nucor's patented Castrip technology may revolutionize the industry for the second time in 15 years. If the process becomes commercially viable, royalty payments will provide a future income stream.

  15. Summary: Cons • Brazil has the best ore in the world, cheap energy, and an excellent transportation infrastructure, giving Brazilian producers huge advantages over U.S. minimills. • Many of Nucor's foreign rivals are unencumbered by environmental regulations, are subsidized by their governments, and have much lower labor costs. • Much of Nucor's production is sold in the depressed nonresidential-construction market. With U.S. capacity utilization standing in the mid-70s, expansion of this market seems far off.

  16. Recommendation • BUY • Diversified Product Mix • Technological Innovation • Low-cost Position • Industry Leader • Negatively correlated = -.5

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