Monday, October 25, 2010

Citigroup (NYSE:C) Lowers Price Target on Nucor (NYSE:NUE)

After missing analysts' expectations, Citigroup (NYSE:C) lowered its price target on Nucor Corp. (NYSE:NUE), while maintaining a "Buy" rating on them.

Citigroup said in a note to clients, "Based on recent results, NUE's qualitative guidance and modeling losses for the company's downstream Steel Products business into 2011, we are lowering our 2010 estimate to $0.61 from $0.78, 2011 to $2.85 from $3.70 and 2012 to $3.80 from $4.30. Based on these changes we are lowering our target price to $53 from $57 but maintaining our Buy...rating.

"NUE expects market conditions to be challenging in 4Q as limited construction activity and newly introduced US steel capacity enters an already competitive market. 3Q demand patterns diverged for long and flat products as structural and bar mill products increased sales volumes sequentially while plate and sheet declined. Similar to comments from STLD earlier this week, the near-term outlook for long-products looks better than flat-rolled.

"While we have slashed our earnings outlook materially, we believe NUE shares are undervalued relative to their mid-cycle earnings potential that is closer to $4.50/sh. Near-term demand indicators remain weak for the remainder of 2010, but we see signs of a construction rebound in 2011 that should lift demand for NUE's long products and stem losses at Steel Products by 2H11."

With continuing uncertainties connected to the weak global economy, Nucor said the fourth quarter may be the most challenging of the year.

Nucor closed Friday at $37.88, dropping $0.01, or 0.03 percent.

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