Nucor Fundamental Analysis
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Nucor
Last Updated: 28 Oct 2023
NYSE: NUE
GICS Sector: Basic Materials
Sub-Industry: Steel

Table of Contents
You can download a summary of Nucor's fundamental analysis in PDF here.
Management
CEO: Leon Topalian
Tenure: 4.1 years
Nucor Corporation's management team has an average tenure of 2.8 years. It is considered experienced.
Source of Revenue
Nucor Corporation manufactures and sells steel and steel products. It is also North America’s largest recycler, using scrap steel as the primary raw material in producing steel and steel products.
The company has three reportable segments: Steel Mills, Steel Products and Raw Materials
Steel Mills
This segment produces hot-rolled, cold-rolled, and galvanised sheet steel products; plate steel products; wide-flange beams, beam blanks, and H-piling and sheet piling products; and bar steel products, such as blooms, billets, concrete reinforcing and merchant bars, and special bar quality products.
It also engages in steel trading and rebar distribution businesses.
The steel mills segment sells its products primarily to steel service centres, fabricators and manufacturers located throughout the United States, Canada, and Mexico.
Steel Products
The Steel Products segment offers hollow structural section steel tubing products, electrical conduits, steel racking, steel joists and joist girders, steel decks, fabricated concrete reinforcing steel products, cold finished steel products, steel fasteners, metal building systems, insulated metal panels, steel grating and expanded metal products, and wire and wire mesh products.
This segment also includes the piling distribution business.
These products are sold primarily for use in non-residential construction applications.
Raw Materials
This segment produces direct reduced iron (DRI); brokers ferrous and nonferrous metals, pig iron, hot briquetted iron (HBI) and DRI; supplies ferroalloys; and processes ferrous and nonferrous scrap metal. The raw materials segment also includes our natural gas drilling operations.
Nucor’s raw materials investments are focused on creating an advantage for its steelmaking operations, through a global information network and a multi-pronged and flexible approach to metallics supply.
Nucor markets products from the steel mills and steel products segments mainly through in-house sales forces. The company also utilises internal distribution and trading companies to market products abroad.
The company has a diverse customer base and is not dependent on any single customer. In 2022, the largest single customer represented approximately 5% of sales and consistently pays within terms.

Nucor Reportable Segment Revenue FY2022
Nucor Economic Moat

Nucor Economic Moat
Economic Moat: None
There are many ways to identify Nucor’s economic moat, but I focus on the above 5 types. The rating is purely subjective and based on my in-depth understanding and analysis of Nucor. Please check my summary to understand more about the economic moat.
Performance Checklist
Is Nucor’s revenue growing YoY for the past 5 years consistently? Inconsistent.
Is the net income growing YoY for the past 5 years consistently? Inconsistent.
Is the cash flow from operating activities growing YoY for the past 5 years consistently? Yes.
Is the free cash flow positive for the past 5 years? Yes.
Is the gross margin % consistent/ growing for the past 5 years? Yes.
Is the EPS growing for the past 5 years? Inconsistent.

Nucor Revenue, Net Income, Operating Cash Flow, and FCF (USD Million)
Is the free cash flow per share growing for the past 5 years? Yes.

Nucor FCF per Share
Management Effectiveness
Is Nucor’s ROE consistently at 12%-15% YoY for the past 5 years? Inconsistent.

Nucor Return on Equity
Is the ROIC consistently at 12%-15% YoY for the past 5 years? No.

Nucor Return on Invested Capital vs Weighted Average Cost of Capital
The trendline for the number of shares outstanding is declining, which is something that an investor would be pleased to see.

Nucor Shares Outstanding (Million Shares)
Nucor Financial Health

Nucor Financial Health (USD Million)
Current Ratio: 3.7 (pass my requirement of >1.0)
Debt-to-EBITDA: 0.8 (pass my requirement of <3.0)
Interest Coverage: 38.1 (pass my requirement of >3.0)
Debt Servicing Ratio: 0% (pass my requirement of <30.0%)
Dividend
Current Dividend yield: 1.4%
Have the dividend payments been stable for the past 5 years? Yes.
Have the dividend payments been growing for the past 5 years? Yes.
Nucor’s dividend payments are reasonably covered by its earnings and cash flows.
Nucor Intrinsic Valuation
Estimated intrinsic value: $228.88
Value is calculated using the discounted cash flow method (taking into account their cash and debt) and scenario planning.
Average free cash flow used: USD$5,400M
Projected growth rate: 3% - 4%
Beta: 1.7
Discount rate: 11.5%
Margin of safety: 40% (Uncertainty: High)
Price range after the margin of safety: <$137.00
Date of calculation: 28 Oct 2023

Nucor Valuation
Free cash flow used is a weighted average that is rounded to the nearest tens. In some instances, I used a more realistic number to represent the free cash flow.
Total debt and cash and short-term investments are last quarter figures that are rounded to the nearest tens. In some instances, I used more realistic numbers to represent them.

Nucor Intrinsic Valuation
Nucor Relative Valuation

Nucor EV-to-EBITDA vs its peers

Nucor Price-Earnings Ratio vs its peers
