Business Study Nucor Steel
Historical Performance Review vs. Goals
The performance of Nucor Steel has been one of volatility in their earnings and demand for their products. Part of the reason of for this, is because of the sharp contraction in demand for steel (due to the server implosion in economic activity). At the same time, the traditional volatility of industry would cause the company's earnings to become even more unpredictable. A good example of this can be seen by looking no further, than comparing revenues with the net income between 2006 and 2008. Where, revenues would climb from $14.7 billion in 2006 to $22.6 billion in 2008. While the net income, would become more unpredictable during the same period of time going from: $1.7 billion in 2006 to $1.4 billion 2007. At which point, they would begin to climb again, with 2008 net income coming in at $1.8 billion. ("Nucor Corporation," 2009) This is important, because it shows a divergence is taking place in the company's earnings, as the severe effects of the recession are starting to be felt. To corroborate this trend, we examined the recent quarterly earnings of Nucor, which highlights the volatility that is being experienced. As the company, would report net earnings for the first half of 2010 of $145.5 million or $.46 cents per share. However, when you compare this to the trend in quarterly earnings, the company is continuing to experience tremendous amounts of volatility. Evidence of this can be seen by comparing third quarter 2010 results with: the same time period in 2009 and the second quarter of 2010. In the third quarter 2009, the company would report a net loss of $29.5 million or $-.10 cents per share. While in the second quarter of the 2010, Nucor would report net earnings of $91 million or $.29 cents per share. ("Nucor Reports Quarterly Results for the First Nine Months of 2010," 2010) This is important, because it shows how the underlying amounts of economic uncertainty are having an impact upon the company's bottom line.
One way that this can be conducted is by looking at: the market capitalization of the company and their total number of employees in comparison with competitors. Currently, Nucor Steel's market capitalization is $12.3 billion. This is much smaller than some of the other players in the industry to include: POSCO ($32.24 billion), Arcelor Mittal ($51.70 billion) and Nippon Steel ($19.53 billion). However, it is important to note that the Nucor Steel has a higher market cap in comparison with U.S. Steel (which is $6.4 billion). As far as the number of employees are: concerned; this can vary from one company to the next. Where, the market capitalization of one manufacturer could be smaller in comparison with Nucor, yet they have more employees working for them. A good example of this can be seen with U.S. Steel, which has 43,000 employees working for them in comparison with the 20,400 employees working at Nucor. ("Nucor Corporation," 2010) This is important, because it shows how Nucor is maintaining balance as far as size is concerned. Where, the company wants to hire a certain amount of employees, in relation to their overall market cap and dominance in the industry.
When you compare how the company has been performing with it stated objectives, it is clear that volatility has been having an impact. Where, the company would make the following statement in their third quarter earnings report, "Operating results excluding LIFO deteriorated from the second quarter, primarily due to lower margins stemming from lower realized selling prices on most steel mill products. This performance is consistent with our comments at the end of the second quarter in which we noted that there was a general slowdown taking place across all product lines. The economy has entered into a period of increased…
