Summary
- Nucor is set to release earnings on Thursday morning.
- The stock has been trending lower within a trend channel for the last five quarters.
- The sentiment toward the stock is neutral and that won't help the stock break out of the downward trend.
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Nucor (NUE) is scheduled to release earnings on Thursday morning before the opening bell. The steel manufacturer based in Charlotte, North Carolina, has performed well from a fundamental perspective, but the stock has been trending lower. Investors will be looking for the earnings to provide a boost to the stock that can get the stock out of its downward trend.
Analysts expect the company to earn $1.32 per share for the second quarter after earning $2.07 one year ago. This means the company is expected to see a 36.2% decline in earnings compared to a year ago. That runs counter to the recent growth in earnings Nucor has experienced. For the last three years the company has seen its earnings grow by an average of 63% per year. Earnings were up 32% in the first quarter compared to the first quarter of 2018.
Sales for the company have increased by an average of 20% per year for the last three years and they were up by 9% in the first quarter. Analysts expect sales to decline by 6.9% in the second quarter.
Nucor’s management efficiency measurements are relatively strong with a return on equity of 26.1%, a return on assets of 12.1%, and a profit margin of 13.1%.
The steel industry has been part of the ongoing trade discussions as President Trump has attempted to level the playing field for U.S. steel manufacturers. The various tariffs on steel from different countries have made an impact, but whether or not it ends up helping or hurting the domestic manufacturers has yet to be seen. Nucor gave guidance in mid-June and pointed to an increase in domestic supply and declining scrap prices as the company tempered investor expectations. The company also pointed to some softening in the automotive sector.
The Stock has been Trending Lower Within a Channel
Turning our attention to the technical picture, Nucor has been struggling a little over the last five quarters. The stock peaked in early 2018, but then fell in the first quarter. It rallied back above the $65 level last summer, but has been trending lower ever since.
We see that the upper rail of the channel connects the highs from last summer, October, and the first and second quarter of 2019. The lower rail connects the lows from December and May. The upper rail is right at the $58 level currently and it is in close proximity to the stock’s 104-week moving average. The 52-week moving average is just below the upper rail at this time.
The weekly overbought/oversold indicators are in the middle of their respective ranges with the 10-week RSI sitting just above the 50 level. The weekly stochastic readings are slightly above the 60 level and have been climbing from the May low. They haven’t reached overbought territory just yet, but if the stock rallies up to the moving averages and the upper rail, the stochastic readings will likely be hitting overbought territory.
The moving averages and the upper rail could make it very difficult for the stock to break out of its downward trend. The earnings report would have to provide a big upside surprise to propel the stock through all of that resistance.
