Anyone who claims to see a market bottom right now, or more downside for that matter, is probably not worth listening to. There are so many variables at play right now such as trade, rates, commodity prices, geopolitical events, the elections - the list goes on and on. To that end, I think it wise to look at stocks that aren't charging an arm and a leg for shares. Nucor (NUE) is one of those names. Coming off two of its best quarters, Nucor stock has exposed a buying opportunity as it was embroiled in the market fallout of the past few weeks.
Obviously a big piece of help for the company has been steel tariffs. Stronger overall steel prices are aiding to bolster the steel giant's revenues. Its also put a slight damper on foreign competition in general regardless of pricing. Third quarter results echoed those impacts. Sales revenue increased a strong 30.4% year over year to $6.74 billion. Subsequent net income increased 165% to a little over $706 million. Not exactly a bad day at the office. That income, coupled with a declining share count drove diluted earnings per share to $2.13. That's a 169.6% increase year over year. Those earnings could have been even higher were it not for a $110 million impairment charge incurred in the quarter that bulldozed $0.26 off of earnings. These charges were related to natural gas assets (yes, the company is invested in the natural gas business).
This isn't a onetime thing. Nucor reported big gains in the second quarter as well, with revenues increasing 25% year over year to $6.5 billion. Just as in the third quarter, Nucor reported diluted earnings per share of $2.13 in Q2. That was a 113% increase year over year. For the first nine months of the year, Nucor's revenues are up over 26%. Net income has roughly doubled to $1.8 billion. On a diluted share basis, earnings are up 84% to $5.35. The company is doing exceptionally well. Compared to rivals like AK Steel (AKS) , this company is doing incredibly well.
The company's guidance implies that they expect fourth quarter results to deliver higher earnings than Q417. I for one am encouraged and think year over year earnings growth in the fourth will be enough to give this stock positive momentum. It is fairly valued in a market that has failed to consider valuation in recent years. If the fourth quarter does indeed beat last year's earnings of $1.20 per diluted share, it would give them bare minimum full year earnings of $6.56. That would give the stock a forward P/E of roughly 9x full year earnings. Obviously that's very conservative, and some estimates actually put full year earnings at $7.57. At that level, the stock is currently trading at less than 8x full year earnings.
The point is, this is a cheap stock with a nice 2.56% dividend yield, sitting in a market that's charging well over 100x earnings for Amazon (AMZN) and Netflix (NFLX) . Barring a total economic collapse, I think the market pullback is exposing opportunities for acquiring shares for those with the timing to do so.