Hook / Thesis
Nucor has the profile of a classic industrial turnaround that can be traded: management ramped investment over the past 18-24 months, the balance sheet remained conservative while margins compressed and then stabilized, and now we can start to see the payoff. Recent quarterly results show positive operating income and net profit even through a softer patch, signaling the business is resilient. Using the latest quarter as a baseline, I’m putting on a tactical long with a target of roughly +15% and a clearly defined stop to protect capital.
In short - the trade is: buy Nucor on signs of continued demand stabilization and limited further capex drag, target price ~ 15% above today's levels, stop-loss to limit downside in case the macro steel cycle reverses.
What Nucor does and why the market should care
Nucor is a U.S.-focused steel producer that primarily uses electric arc furnaces to convert scrap into finished steel: sheet, plate, structural beam products and bar steel. The company sells mostly to U.S., Canada and Mexico manufacturers, service centers and fabricators. The reason investors should pay attention is simple: steel is cyclical, but Nucor’s low-debt balance sheet, solid operating cash flow and investment program give it optionality on pricing cycles. When demand and HRC / sheet spreads recover, Nucor re-levers a relatively clean balance sheet into outsized returns.
That optionality is visible in the numbers. The most recent quarterly filing for the quarter ending 10/04/2025 reported revenues of $8.521B and operating income of $883M, producing net income of $683M and diluted EPS of $2.63. Those are material positive results in the context of a year where quarter-to-quarter results were volatile.
Why this is a trade, not a buy-and-forget
There are three practical reasons the setup favors a tactical long:
- Capex intensity has been real. Recent cash flow trends show meaningful investing outflows - for example, the quarter ending 04/05/2025 recorded net cash flow from investing of -$1.18B. Capex-led investments often hit a point where spending falls and incremental capacity contribution rises; that inflection can boost margins without a proportional increase in depreciation or SG&A.
- Balance sheet strength. As of the latest available quarter, total assets were $34.776B and equity was roughly $21.931B (equity attributable to parent ~ $20.77B in that same period). Liabilities are manageable at ~ $12.845B, giving Nucor flexibility to return capital or defend margins.
- Cash generation and shareholder returns. The company continues to generate operating cash - earlier quarters show operating cash flow in the $300M-to-$1.5B range depending on seasonality - and management has kept a steady quarterly dividend (most recent declared cash dividend 12/01/2025 of $0.56 per share). That yields roughly ~1.2% at today’s price and acts as a small income cushion for investors while waiting for the cycle to recover.
Valuation framing
Use the numbers you have and keep the math transparent: the last trade price is ~ $181.25. Diluted average shares from the most recent quarter are about 230.2M, implying an approximate market capitalization near $41.7B (price times shares outstanding - simple estimate).
Annualizing the most recent quarter’s net income (Q3 2025 net income $683M x 4) gives an illustrative run-rate net income near $2.73B. That yields a simple price-to-earnings ratio in the mid-teens - roughly ~15x on a last-quarter annualized basis. Price-to-book is about 2.0x (market cap / equity attributable to parent ~ $41.7B / $20.77B).
Those multiple levels are not cheap in absolute terms for a cyclical commodity business, but they are reasonable if you believe mid-cycle margins and returns normalize near current run-rate or improve modestly as investments mature. In other words: investor returns depend on whether the investment program shifts from a drag to a generator of higher incremental margins.
Note on peers and relative valuation - the peer list in the dataset is not organized for a direct apples-to-apples comparison. Broadly, domestic integrated steel names can trade at similar P/B but higher volatility; Nucor’s P/E in the mid-teens looks fair if your macro view is neutral-to-improving demand.
Catalysts to move the stock higher
- Completion of large capital projects or commissioning of upgraded mills that increase throughput while fixing costs - capex outflows were sizeable, and the move from build to run can materially lift margins.
- Order-book stabilization - industry commentary has noted order backlogs that could turn into a demand tailwind into 2026, improving utilization and spreads.
- Any signs of scrap-price normalization or narrowing between raw-material and finished-product spreads that translate into higher gross margin dollars per ton.
- Shareholder-friendly capital allocation - steady dividends and the potential to accelerate buybacks if cash flow stabilizes, which would provide EPS support.
Trade plan - actionable
Direction: Long NUE (expecting ~15% upside)
Entry: 178 - 184 (current tape ~ 181.25)
Primary target: 208 (roughly +15% from mid entry)
Secondary target / stretch: 225 (if margins re-rate and EPS guidance is raised)
Stop loss: 165 (approximately -9% from entry range) - move to breakeven after a 7-10% move in your favor
Time horizon: 6-12 months (position trade, not an intraday scalp)
Size & risk: position size should reflect the stop-loss distance so that the trader’s max portfolio risk matches their risk tolerance; recommended risk profile: medium.
Risks and counterarguments
- Steel cycle reversal - demand for steel is cyclical. A sharper-than-expected slowdown in U.S. construction or durable goods would hit volumes and crush spreads.
- Raw material volatility - scrap prices and energy costs can spike, compressing margins quickly given the limited short-run hedging available to mills.
- Capex execution risk - the investment program that is supposed to drive the upside could run late or face cost overruns, turning a hoped-for tailwind into continued margin pressure.
- Policy and tariff risk - trade policy or a change in tariffs can alter domestic spreads and open the door to imported supply pressure.
- Macro / rates - higher-for-longer interest rates could slow infrastructure spending and industrial demand, and raise financing costs for working capital.
Counterargument: One could reasonably argue that the market has already priced in a mid-cycle recovery after the run-up this past year. If order books disappoint or if Nucor’s capex continues to depress FCF, there’s a credible path to the stock trading below the proposed stop. That is precisely why the trade includes a defined stop and a relatively short time horizon.
What would change my mind
I would step away from this trade if any of the following happens:
- Management explicitly guides to prolonged capex drag or provides lower-than-expected operating margins for the next two quarters.
- Order backlogs evaporate or major end-markets (construction, auto, energy) show sustained decline in shipments and bookings.
- Balance sheet stress emerges - e.g., rising leverage, large one-time write-downs or a material shrink in equity value quarter-to-quarter.
Conclusion - clear stance
I’m constructive on Nucor as a tactical long with a target of +15% over the next 6-12 months. The company has the balance sheet, cash flow capacity and visible capex cadence to support a re-rating if the investment program starts producing higher incremental returns and if order backlogs convert to shipments. Trade it as a position with a disciplined stop (165) and treat any weakness that holds above the stop as an opportunity to add if the company’s operational metrics improve. If the industry re-enters a prolonged trough or capex disappoints materially, the thesis would be invalidated and I would exit or tighten stops aggressively.
Disclosure: This is a trade idea for educational purposes and not investment advice. Position size and suitability should be evaluated against your personal financial situation.