Thursday was a two-of-two metals story: Alcoa shares plunged on an outlook tempered by higher costs and lower production, while Nucor and Steel Dynamics closed at record highs after forecasting record second-quarter earnings.
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Both Nukor‘s (NUE) result early Thursday and the steel dynamics (STLD) report late Wednesday highlighted strength in non-residential construction markets.
Both steel and aluminum prices have risen since Russia’s invasion of Ukraine on February 24 amid high natural gas prices and concerns about supply disruptions. While the Russian invasion reversed a dive in steel prices, it further fueled already sizzling aluminum prices.
However, Alcoa said it will incur an additional $115 million in raw material costs this quarter. Management also said it would cut supplies of bauxite, the feedstock for alumina and aluminum, in response to its exit from supplies to Russia.
BMO Capital Markets analyst David Gagliano lowered its target for AA shares from 99 to 95 while keeping a market perform rating. He cited bauxite production and cost pressures as reasons for a “somewhat cautious” outlook.
The earnings are due from the steelmaker Cleveland Cliffs (CLF) on Friday.
STLD, NUE, and CLF stocks all made breakouts in late February or early March and then continued to outperform the market.
Steel stocks rank 8th out of 197 industry groups based on stock performance and momentum. Nucor stock is part of the IBD Leaderboard portfolio of elite stocks, while CLF stock is part of the flagship IBD 50 list.
Nucor earnings
Nucor’s revenue rose 147% year over year to $7.67, 37 cents above estimates. Revenue rose 49% to $10.49 billion, beating previous views.
Nucor reported lower profitability from its sheet metal mills in the first quarter due to weaker prices amid increased imports and a modest destocking. However, a price increase is likely to result in higher profits for plate and heavy plate plants in the second quarter.
NUE shares rose 3.75% to 175.59 in Thursday’s trading but fell well short of an intraday high of 187.90. Closed Nucor stock is up 39% since its breakout on Feb. 25.
steel dynamics
Steel Dynamics earnings per share rose 187% to $6.02, up 36 cents. Revenue rose 57% to $5.57 billion from estimates of $5.32 billion.
Steel Dynamics said results, despite lower hot coil prices earlier in the quarter, reflected a nearly doubling in operating income for its steelmaking operations.
“The non-residential construction sector remains strong, resulting in a record backlog with record forward prices for the company’s steel fabrication platform,” the company said.
Meanwhile, Steel Dynamics said its Sinton, Texas plant, which is coming online, is expected to ship about 1.5 million tons this year.
STLD shares rose 1.9% to 93.24 after rising to 100.37 on the day.
Alcoa stock
Alcoa’s earnings per share rose 287% to $3.06, up 13 cents from expectations. Revenue rose 15% to $3.293 billion, just below estimates of $3.45 billion.
Alcoa said it expects $115 million in additional energy and raw material costs this quarter, but said that should be more than offset by higher alumina and aluminum prices and shipments. Prospects for bauxite shipments this year have been reduced by 2 million dry weight tons to 46-47 million tons.
AA-Shares fell nearly 17% on Thursday to 72.20, falling below its 50-day moving average and ending momentum for now. AA shares remain 37% above December buy point.
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