Source: Davit Kirakosyan
Nucor (NYSE:NUE) Shares Experience an Uptick
Shares of the steel production company, Nucor (NYSE:NUE), experienced a significant growth of over 4% today. This increase is attributed to the recommendation upgrade by UBS, a Swiss multinational investment bank and financial services company, from Neutral to Buy. UBS also raised its price target marginally from $156 to $160.
The investment bank justified its upgrade by pointing towards stronger-than-anticipated tariff support, favorable pricing trends, and recent share price de-rating. These factors are considered as catalysts to stimulate renewed upside for the company’s stock.
Nucor’s Valuation Compression and Impact of Tariffs
Nucor’s valuation has observed a compression since early December. Currently, the company’s stock is trading at around 7.5 times UBS’s 2025 EV/EBITDA (Enterprise Value/Earnings Before Interest, Taxes, Depreciation, and Amortization) estimates. This is a noteworthy drop from roughly 9 times.
Simultaneously, the steel industry has seen a surge in steel prices. This upsurge can be traced back to the U.S. government’s announcement of imposing a 25% tariff under Section 232. The new tariff rule ignited a wave of near-term panic buying, which has positively influenced the steel prices.
The Forecast of Steel Prices and the Impact on Nucor
Despite the current surge, UBS anticipates steel prices to moderate in the second half of 2025. However, the investment bank believes that the reshoring trend and elevated import protection levels could potentially offset the risks associated with declining demand and policy uncertainty. This includes potential additional tariffs on specific countries.
UBS maintains its confidence in the medium-term prices of hot-rolled coil (HRC) remaining above $800 per short ton. This expectation is backed by the rising cost curve, which is driven by increasing scrap prices, and a tighter import parity environment.
Impact of Tariffs on Nucor’s Product Segment
These dynamics have already initiated a revival in the plate market. Interestingly, Nucor’s Product segment is set to reap benefits from tariffs on downstream goods. This is a notable development for the company as it can leverage the favorable conditions to increase its overall profitability.
Looking Ahead for Nucor
With this positive turn of events, Nucor’s outlook remains positive. The company can use this as an opportunity to solidify its position in the market. The strong tariff support, pricing trends, and share price de-rating present the company with a promising future, should these conditions persist.
Furthermore, the reshoring trend and elevated import protection levels provide an additional level of security against the risks of declining demand and policy uncertainty. These can serve as strategic advantages for Nucor in the coming years, especially if the company continues to leverage the benefits of tariffs on downstream goods.
Overall, the UBS upgrade to Buy and the increase of the price target to $160 signals a strong vote of confidence in Nucor’s future growth. However, investors and stakeholders should continue to monitor market trends and policy changes closely, as these factors can significantly impact the steel industry and companies like Nucor.