Dj Nucor Corp. Stock Rises 4.4%, Outperforms Competitors

A recent pullback in Nucor's shares and the steelmaker's growth potential over the medium term have turned it into an "attractive" buying opportunity, UBS Securities said Monday.

Steel prices recently rallied due to panic-buying ahead of a 25% global tariff on steel products that was announced by US President Donald Trump, the brokerage said in a note to clients. Nucor's shares have lost 6.5% in value over the past month.

Steel prices are likely to drop in the second half of the year as panic-buying eases, while an "unpredictable" US trade policy might affect demand, UBS analyst Andrew Jones said. The brokerage, however, sees Nucor benefitting from a potential reshoring of some steel-intensive production.

UBS upgraded its rating on the steelmaker's stock to buy from neutral and raised its price target to $160 from $156. The shares were up 4.5% ahead of market close on Monday.

"The selloff and de-rating on escalating trade war concerns offers an attractive entry point for investors," Jones wrote. "We think the demand downside from tariffs is likely to be offset by some reshoring efforts and a higher near-term price deck."

The brokerage said it is confident in medium-term hot-rolled coil prices topping $800 per short ton, compared with Nucor's prices around $765, citing support from a higher cost curve and "import parity" so far this year. "Higher import parity has turned around the plate market, and (Nucor's) products business is likely to benefit from 25% tariffs on downstream goods," Jones said.

That hot-rolled coil price outlook, combined with Nucor's growth pipeline, should drive earnings momentum from the second quarter of this year into 2026 and beyond, according to the UBS note.

"While not game-changer in our view as markets like joist and deck rely little on imports, there are areas of the portfolio that should benefit, so we expect some upside risk to previously modeled 15% medium-term EBITDA margins," Jones said.

UBS raised Nucor's earnings per share estimate for 2025, while downgrading 2026 and 2027 projections.

By Michael Sheldon

Following the re-election of President Donald Trump last November, there was a growing sense of optimism regarding the outlook for the economy and financial markets in 2025. A pro-business president working on policies that included reduced regulation, lower taxes, energy security, reshoring, and possible peace between Russia and Ukraine all appeared to represent positive tailwinds for financial markets this year. Tariffs were clearly on the agenda, but it appeared that they might be used mainly as a negotiating tool.

Fast forward a few weeks and policies from Trump 2.0 have led to growing confusion and uncertainty among both consumers and businesses. The impact is increasingly showing up in survey data and in the statement associated with the most recent Federal Reserve meeting last week, the Federal Open Market Committee stated that "uncertainty around the economic outlook has increased."

There is an old saying in economics, "watch what I say and not what I do." While sentiment surveys have turned weaker, for now, consumers continue to spend and support moderate growth in the economy. However, if the president's tariff policy continues to create uncertainty, it may not take much for consumer spending to pull back which could lead to a slowdown in the months ahead.

At this pivotal time, it's especially important for financial advisors to keep an eye on economic data. Here I provide an overview of where things stand and then suggest four important indicators advisors should follow.

Consumer strength. To get a better sense of where the economy is truly heading, you need to keep an eye on the U.S. consumer, which represents about two-thirds of the overall U.S. economy. Looking at some of the most recent survey data from the Conference Board Index and the Michigan Sentiment Index is a bit worrisome.

For example, the Conference Board's consumer expectations index from last month declined 9.3 points to a level of 72.9. This is below the recession warning level of 80. Michigan's latest reading for consumer sentiment expectations (a slightly different monthly survey) was also weak when it was released recently and fell a sizable 9.8 points to 54.2, representing the lowest level since July, 2022.

Last month the economy created an additional 151,000 jobs, still positive but down somewhat from the three-year trend of 232,000. Weekly jobless claims remain comfortably below 250,000. Above that level economists start to get a little more concerned.

Real wages (i.e. wages minus the rate of inflation) continue to remain positive, which helps boost consumer buying power.

Over the past ten years, household net worth (i.e. total assets minus total liabilities) has increased by an impressive $79.8 trillion to $169.4 trillion, according to Federal Reserve data. Offsetting that, the household savings rate currently stands at just 4.6% today, down from a 10-year average of 7%.

Business sentiment. In February the monthly National Federation of Independent Business (NFIB) small business survey, which dates back more than 50 years, showed policy uncertainty is at its second highest reading ever.

Recent data on cyclical parts of the economy like housing and autos has been mixed. For example, last week existing home sales rose 4.2% month over month (while down 1.2% year over year) and the National Association of Home Builders (NAHB) Index fell 3 points last month to 39, representing the lowest level in seven months and down 24% year over year.

On the manufacturing side, durable goods orders excluding volatile categories like defense and aircraft have generally been trending higher in recent months, but the monthly Institute for Supply Management's Purchasing Managers' Index ( PMI) declined modestly from 50.9 to 50.3 last month after posting a reading below 50 in 25 of the past 28 months. Note: a reading above 50 indicates expansion while a reading below 50 indicates contraction.

Over the past few weeks, we have started to hear weaker guidance from a growing number of companies across different industries. Some examples include Delta Air Lines, Nucor Corp, Nike, Ulta Beauty, Accenture, FedEx, and Lennar.

Wall Street's view. Analysts have been reducing earnings per share estimates for the first quarter and full year in recent weeks. For all of 2025, EPS growth estimates remain solid with the latest data still calling for full year EPS growth of 11.5%. However, this is down from estimates of 14.1% full year EPS growth as of Dec. 31, 2024, according to FactSet. This will be a trend worth watching in the months ahead due to the fact that stocks tend to follow the direction of corporate profits over time.

Based on recent data, some Wall Street firms are starting to reduce their economic forecasts. For example, Goldman Sachs economists recently lowered their 2025 GDP forecast from 2.4% to 1.7% (which represents the first downgrade in their economic outlook in 2 1/2 years).

Conclusion. Consumer and business sentiment has already declined notably over the past few months. Therefore, from a contrarian viewpoint, if a few things start to go right, the outlook for the economy and equity markets could certainly turn around before too long. Until there is more clarity, I suggest closely monitoring:

• Future tariff news. Pay particular attention to news about reciprocal tariffs expected to be announced on April 2, 2025.
• Data on the health of the U.S. consumer. These include weekly jobless claims, retail sales, and household balance sheet data.
• Monthly inflation data. It could influence when and by how much the Federal Reserve may reduce short-term interest rates in 2025.
• Credit spreads. The spread between corporate and Treasury bonds, for example, provide an indication of whether financial conditions are supportive or tight and will likely provide important clues about whether the U.S. economy is likely to hit a short-term speed bump or experience a more meaningful downturn.

Despite what seems like an unpredictable decision-making process by Trump so far this year, lower taxes, reduced regulation, a rise in productivity from artificial intelligence along with peace between Ukraine and Russia (a big if), could all provide positive tailwinds for U.S. economic growth and financial markets down the road.

Michael Sheldon , CFA, CFP, was formerly chief investment officer of RDM Financial Group in Westport, Conn. He started his career at the Bank of Tokyo Ltd. in New York City, and has worked in fixed-income sales and equity market strategy at other firms. He graduated from Vassar College in 1988 with honors in economics.

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

Al Root

Nucor and other steel stocks rose in Monday trading, helped by a Wall Street broker's more "constructive view" of the sector.

UBS analyst Andrew Jones said in a Monday report that American steel stocks that he follows are down more than 15% from mid-December levels despite President Donald Trump's trade protections. His administration recently implemented 25% tariffs on steel and aluminum imports.

Benchmark steel prices shot up from roughly $750 a ton to $900 a ton after tariffs were announced.

There is some concern that tariffs could slow the economy and, in turn, reduce steel demand. But that doesn't faze Jones: "We are confident that prices will hold in the $800s [per ton], supported by a much higher cost curve (on scrap) and higher import parities (on tariffs), even in a bleak demand scenario." Prices north of $800 should lead to higher earnings for steel producers.

Higher steel prices and a selloff in the sector's stocks are why Jones feels more "constructive" or, simply put, optimistic about the outlook for steel companies. He upgraded shares of Nucor and Steel Dynamics to Buy from Hold. Jones' Nucor price target went to $160 from $156 a share. His Steel Dynamics price target stayed at $149 a share.

Nucor stock was up 5.3% in at $128.52 a share. Steel Dynamics stock was up 3.6% at $127.06, while the S&P 500 and Dow Jones Industrial Average were up 1.5% and 1.2%, respectively.

Other steel stocks were up despite no ratings change. U.S. Steel stock added 2.4% to $41.86 a share. Cleveland-Cliffs shares were up 3.1% at $9.72 apiece. Jones doesn't cover Cliffs or U.S. Steel shares.

Overall, 50% of analysts covering Cliffs stock rate shares Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for Cliffs stock is about $12 a share.

For U.S. Steel, 55% of analysts covering the company rate shares Buy, and the average price target is about $42 a share.

The Buy-rating ratios for Nucor and Steel Dynamics are 69% and 50%, respectively. The average target price for Nucor shares is about $155. The average for Steel Dynamics stock is about $147.

Write to Al Root at allen.root@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

By Dean Seal

Shares of U.S. steel companies advanced after UBS analysts said a recent selloff in the sector is out of step with potential tailwinds from tariffs on steel imports.

The analysts upgraded Nucor and Steel Dynamics to buy on Monday, and said in a research note that top steel producers have seen their shares drop from December highs despite new steel protections that have driven a material shortage and hiked prices.

While prices are expected to pull back in the coming years from increases in capacity, higher utilization rates for U.S. steel and redirected trade flows, they should hold at solid levels due to higher costs on scrap and higher import parities from tariffs, the analysts said.

Nucor's stock was up 5.6% at $128.80 in early trading, and shares of Steel Dynamics rose 3.6% to $127.04.

Other big names in the sector got a boost as well. Shares of Commercial Metals, which UBS opted to maintain at a neutral rating, advanced 5.3% to 49.06. Reliance's stock gained 3.2% to $286.47, U.S. Steel's stock rose 2.7% to $42 and shares of Cleveland-Cliffs ticked up 1.8% to $9.59.

The analysts expect the industry to face less demand destruction this year than the market seems to fear, and for U.S. shipments to benefit from a pullback in imports.

The steelmaker selloff from the recent trade war is presenting an attractive opportunity to buy Nucor and Steel Dynamics, the analysts said.

Write to Dean Seal at dean.seal@wsj.com