Nucor (NUE) Warns on Q1 Earnings

Nucor Corporation (NYSE: NUE) announced guidance for its first quarter ending April 4, 2015. Nucor expects first quarter results to be in the range of $0.10 to $0.15 per diluted share.

*** The Street consensus called for Q1 EPS of $0.40.

This range is a decrease from the first quarter of 2014 earnings of $0.35 per diluted share and a decrease from the fourth quarter of 2014 earnings of $0.65 per diluted share. Additionally, this range is below the qualitative guidance presented in our fourth quarter of 2014 earnings release and conference call which stated, "We currently expect that first quarter of 2015 earnings will decrease from the fourth quarter of 2014 to a level slightly exceeding the first quarter of 2014."

Overall operating performance at the steel mills segment for the first quarter of 2015 is expected to decrease significantly compared to the fourth quarter of 2014 primarily due to lower selling prices and margins resulting from the exceptionally high level of imports flooding the domestic market. Total imports increased 38% in 2014 compared to 2013, with imports accounting for approximately 34% of the total domestic shipments in 2014. Import levels gained momentum throughout 2014, as the imports in the second half of the year were 10% higher than in the first half. This trend has continued in 2015, with January total imports accounting for approximately 39% of total January domestic shipments, a 37% increase from January 2014. Global overcapacity built by state-owned enterprises is the biggest risk factor to our business.

Although all steel prices are being driven lower by imports, the sheet market is experiencing the greatest impact. Published index pricing indicates that hot-band prices at the end of 2014 decreased 11% from its peak level in the third quarter of 2014. Through mid-March 2015, hot-band pricing has decreased an additional 19% from the end of 2014. We expect that steel mill margins for all products should improve in the second quarter as we begin to realize the benefits of lower raw materials costs and selling prices begin to stabilize. It is our current expectation that although imports will subside in the second quarter, they will remain at excessively high levels.

Conditions remain challenging in energy markets, in which the collapse in oil prices and continued high levels of imported oil country tubular goods products has caused an inventory glut in the pipe and tube sector. Automotive markets remain strong and are continuing to improve. We continue to see improving demand in the nonresidential construction markets. Once energy market steel inventories are rebalanced later this year, we expect overall steel demand to meet or exceed levels seen in 2014.

The overall operating performance of the downstream products segment for the first quarter of 2015 is expected to decrease from the fourth quarter of 2014 due to typical seasonality experienced in the first quarter; however, the results of the downstream products segment in the first quarter of 2015 are expected to increase over the first quarter of 2014 due to both lower input costs and improved volumes, supporting the resiliency of the slow but steady growth in nonresidential construction markets. The operating performance of the raw materials segment for the first quarter of 2015 is expected to decrease from the fourth quarter of 2014 due to an anticipated operating loss of approximately $37 million ($0.08 per diluted share) at Nucor Steel Louisiana and decreased performance of our scrap processing business and natural gas drilling working interests.

Projected first quarter of 2015 results include an estimated LIFO credit of $16.0 million ($0.03 per diluted share), compared to a credit of $57.3 million ($0.11 per diluted share) in the fourth quarter of 2014 and a charge of $14.5 million ($0.03 per diluted share) in the first quarter of 2014. LIFO charges or credits for interim periods are based on management's current estimates of both inventory costs and quantities expected at year-end, and that full year estimate is incurred ratably over the remainder of the year. Included in the fourth quarter of 2014 results were $8.9 million ($0.02 per diluted share) of non-cash inventory related purchase accounting charges associated with the acquisition of Nucor Steel Gallatin and a $13.2 million ($0.04 per diluted share) out-of-period non-cash gain related to a correction to tax balances. Included in the first quarter of 2014 earnings was a $12.8 million ($0.04 per diluted share) charge primarily related to tax legislation changes in the state of New York and a $9.0 million charge ($0.02 per diluted share) related to the disposal of assets within the steel mills segment.

The production operations of Nucor Steel Louisiana have remained suspended since the equipment failure related to the process gas heater occurred on November 2, 2014. We are close to completing the necessary repairs and adjustments to the process gas heater, and we estimate that Nucor Steel Louisiana will be operational before the end of the first quarter of 2015.

Nucor and affiliates are manufacturers of steel products, with operating facilities primarily in the U.S. and Canada. Products produced include: carbon and alloy steel -- in bars, beams, sheet and plate; steel piling; steel joists and joist girders; steel deck; fabricated concrete reinforcing steel; cold finished steel; steel fasteners; metal building systems; steel grating and expanded metal; and wire and wire mesh. Nucor, through The David J. Joseph Company, also brokers ferrous and nonferrous metals, pig iron and HBI/DRI; supplies ferro-alloys; and processes ferrous and nonferrous scrap. Nucor is North America's largest recycler.

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