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Partner, Head of Options Trading
Base Camp Trading
IMPORTANT NOTICE! No representation is being made that the use of this strategy or any system or trading methodology will generate profits. Past performance is not necessarily indicative of future results. There is substantial risk of loss associated with trading securities and options on equities. Only risk capital should be used to trade. Trading securities is not suitable for everyone. Disclaimer: Futures, Options, and Currency trading all have large potential rewards, but they also have large potential risk. You must be aware of the risks and be willing to accept them in order to invest in these markets. Don't trade with money you can't afford to lose. This website is neither a solicitation nor an offer to Buy/Sell futures, options, or currencies. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results.
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Nucor Fell 6% on Guidance Still Above Last Quarter
Hey there, bargain hunter. Two of the best-run steel companies in America dropped guidance midweek and got punished for it in Thursday’s session. The question worth asking is whether the market oversold the story. ScoreboardNucor guided Q3 2026 earnings of $5.55 to $5.65 per diluted share for the quarter ending October 3, 2026. That compares to the consensus estimate of $6.17. Steel Dynamics guided $5.34 to $5.38 per diluted share, against Q2’s $3.69 and the prior-year Q3 of $2.74. NUE sank about 6.3% and STLD fell about 4.1% in Thursday’s session. What Actually HappenedNucor’s Q2 net earnings were $5.04 per diluted share, while the year-ago quarter came in at $2.60. The midpoint of Q3 guidance, $5.60, sits about 11% above Q2 and more than double the year-ago comparable. That is not a warning. That is a beat-and-raise story with the asterisk that Wall Street had penciled in something even higher. The sequential comparison is tougher than the headline numbers suggest. Q2 results included a $130 million reduction to cost of products sold tied to cash refunds on prior periods’ raw materials procurement costs and a $61 million non-cash Helion valuation gain, neither of which Nucor expects to repeat in Q3. Strip those out and Q3 guidance is a clean step forward. The Street apparently forgot to strip them out. Management said Q3 earnings are expected to rise in steel mills and steel products, driven by higher average selling prices, stable or higher volumes, and higher realized pricing. The raw materials segment is expected to see lower earnings on weaker pricing and shipments. The Business and Why Tariffs Still MatterNucor runs three segments: steel mills, steel products, and raw materials. Unlike traditional blast furnace operators, Nucor’s electric arc furnace model is more flexible and cost-efficient, allowing it to scale production up or down as demand shifts. That flexibility is worth real money when scrap prices move. Federal trade policy remains a meaningful support for domestic pricing. Section 232 tariffs have been repeatedly adjusted in recent years, and the backdrop is still protectionist. But the specific import-share claim in this draft is too precise to stand as written without a primary, dated data point, so it is best treated as directional: finished steel imports have been running lower than prior peaks, and enforcement has been a tailwind for domestic producers. The overall environment remains positive for domestic steel producers due to tight supply, trade protections, low customer inventories, and solid end-market demand. Management has pointed to demand from energy, data centers, and reshoring efforts expected to continue into 2027. Key Metrics
- Q2 2026 EBITDA: $2.02 billion, up from $1.51 billion in Q1 2026 and $1.30 billion in Q2 2025.
- Free cash flow: $829 million in Q2, the strongest since 2023.
- Liquidity: $3.4 billion, with a debt-to-capital ratio of approximately 23%.
- Q2 revenue: $10.40 billion.
- In Q3 to date, Nucor has repurchased about 2.03 million shares at an average of $247.04, returning approximately $1.36 billion to stockholders year-to-date via buybacks and dividends.
- The board declared its 213th consecutive quarterly dividend of $0.56 per share.
Is It Cheap?The trailing PE is roughly 20.8x and the forward PE is approximately 12x. The three-year average PE for NUE is 15.6x and the five-year average is 11.4x. At $248, you are paying near the upper end of that historical band on trailing earnings but close to the floor on forward. Analysts forecast NUE will post approximately $18.52 in earnings per share for the full year. That puts the stock at roughly 13.4x full-year estimates after Thursday’s drop. Some analysts argue the guidance is not a thesis breaker because projected earnings still show year-over-year and sequential growth. The median published analyst price target is approximately $270. Bull / Base / BearBull: Tariff protection holds, customer inventories stay thin, and Q3 actual earnings clear the guidance midpoint. NUE re-rates to $270+ as the year-end construction spending cycle kicks in. Base: Q3 delivers near the midpoint. The raw materials drag persists one more quarter before scrap stabilizes. Stock trades flat to slightly higher through year-end. Bear: Canada’s tariff regime can hit 50% surtaxes on steel imports above quota levels, adding friction and uncertainty for cross-border flows. Any softening in domestic construction demand accelerates the selloff. Action PlanThis is a stock that fell because analysts overestimated a one-time-inflated quarter, not because the business deteriorated. For conservative accounts, scale in at current levels with a second tranche if the stock tests $235. For aggressive accounts, a full position at $248 with a stop below $220 is defensible given the forward multiple. Cheap Investor Scorecard
- Q3 EPS vs. guidance midpoint ($5.60) on October 26 report date
- Raw materials segment recovery: watch scrap pricing monthly
- Steel mill utilization rate vs. the most recently disclosed level
- Import pressure: any sustained rebound in finished imports is the line to watch
- Free cash flow: does Q3 match or beat Q2’s $829 million?
- Shareholder returns: buyback pace vs. the current authorization
- Canada tariff situation: any escalation hits STLD harder than NUE
Bottom LineIf Q3 earnings arrive near $5.60 and the raw materials drag proves temporary, buying NUE at $248 at about 13x full-year estimates looks like a reasonable entry for a business with a 213-quarter dividend streak, a clean balance sheet, and import protection working in its favor. If scrap prices deteriorate further and Canada tariff retaliations expand, the bear case gets teeth. Know which one you are betting on before you buy. |
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