The leaders of Nucor Corp. and U.S. Steel Corp. have this week nudged down investors’ expectations of their third-quarter results, saying that their production volumes have retreated from their levels of earlier this year.
In a short statement Sept. 14, Charlotte-based Nucor said earnings from its steel mills segment—which contributed 84% of the company’s first-half pre-tax profits—are forecast to be “considerably lower” in the third quarter versus the three months ended June 30. The company said the main culprits are shrinking margins and lower volumes, “particularly at [its] sheet and plate mills.”
The executives at Nucor said its steel products division, which they boosted earlier this year via the $3 billion acquisition of C.H.I. Overhead Doors, is on track for a good Q3 and that its raw materials group’s results should be in line with the second quarter. But the performance of their steel mills have them aiming for Q3 earnings per share between $6.30 and $6.40, well below the consensus analyst estimate of $7.76 per share.
U.S. Steel CEO David Burritt delivered similar, albeit less severe, news on the morning Sept. 15. The Pittsburgh-based company expects adjusted EBITDA for Q3 to come in around $825 million (versus more than $1.6 billion in Q2) and that adjusted net EPS will be $1.90 to $1.95. Analysts’ consensus estimate is around $2.10 per share.
Burritt said U.S. Steel’s businesses have faced “market headwinds that have accelerated over the quarter” in several of its end markets. The company has in response temporarily idled a blast furnace and a tin line and pulled forward from October two planned outages, one of them in Central Europe. Still, of the company’s four business segments, only the tubular group—its smallest by some margin—is forecast to put up better numbers than in the spring.
“Supply chain issues in automotive and appliance end-markets continue, while containers and packaging has softened, and service center buyers remain on the sidelines,” the company said in its statement.
Shares of Nucor (Ticker: NUE) closed at $117.27 Sept. 15, down 14% from the Sept. 13 close before the company’s announcement. Those of U.S. Steel (Ticker: X) have fallen 9% over the past two days and closed at $20.30 on Sept. 15.
Worth putting into perspective is that these guidance updates come after Nucor, U.S. Steel and other many other steel manufacturers have been ringing up strong profits in recent quarters. For instance, Nucor’s C-suite thinks the company will still deliver record results for the full year. And despite his so-so update, Burritt pointed out that his team still expect the company’s third-quarter results will be “solid.” By way of comparison to the forecast $825 million of Q3 adjusted EBITDA, the company averaged $1.4 billion per quarter on that front in 2021.
More broadly, the steel companies’ heads-ups to investors echo a number of recent economic indicators suggesting that appetite for capital goods, while still strong compared to historical figures, is trending down from its recent levels. The Business Roundtable third-quarter outlook published Sept. 15 illustrated that trend and forecast a further pullback in capital investment plans.
