Nucor NUE said that it is investing an estimated $230 million to add an additional cold mill at its Nucor Steel Arkansas division. The specialty cold mill complex, which is expected to be operational in roughly two years, will expand the steelmaker’s capability to make advanced high-strength steel products for the automotive industry.
Nucor Steel Arkansas currently employs 650 people. The addition of the specialty cold mill complex is expected to add roughly 100 jobs at the facility.
The additional cold mill will give Nucor the capability to make products that it currently does not produce. Moreover, locating the cold mill at the company’s sheet mill in Arkansas will give Nucor a transportation advantage over competitors outside the region currently supplying the local market and the growing Mexican market.
Nucor’s shares closed roughly 0.4% higher at $46.17 yesterday.
Nucor recently agreed to buy Chicago-based Independence Tube Corporation for $435 million. Independence Tube is a leading producer of hollow structural section steel tubing. The acquisition is a strategic fit and highly complementary for Nucor and is in sync with its strategy to expand the number of value-added product offerings to its customers.
Nucor, last week, provided its outlook for the third quarter of 2016. The company expects earnings for the quarter to be in the band of 85 cents to 90 cents per share. That is an increase from 71 cents a share it earned a year ago and 73 cents per share recorded in the previous quarter.
Nucor said that the expected improvement in third-quarter earnings on a sequential comparison basis mainly reflects improved performance in its Steel Mills and Raw Materials divisions.
Profitability of the company’s sheet mills is expected to improve in the quarter on higher average selling prices. The company also expects a significant improvement in performance in the Raw Materials segment in the third quarter compared with the second on better performance in its direct reduced iron (“DRI”) facilities. However, Nucor envisions reduced profitability in its Steel Products segment on a sequential comparison basis in the third quarter on margin compression.
Nucor has a Zacks Rank #3 (Hold).
Better-ranked companies in the basic materials space include Ternium S.A. TX, Angang Steel Company Limited ANGGY and Northwest Pipe Co. NWPX, all holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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