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Nucor(NUE), a Charitable Trust Holding, fell Wednesday despite management giving seemingly optimistic earnings guidance in the fourth quarter.

• Management expects the quarter to bring in record profits, with earnings per share expected to rise to $7.65- $7.75 from $7.28 during the third quarter.
• Rarely does a stock drop 8.6% when a company has been in existence for over 70 years on the news of record quarterly income. But expectations do matter and the consensus street estimate prior to the announcement was $7.95.

Nucor offered limited but encouraging comments about next year’s prospects, while looking out. In a press release, Nucor stated that they are nearing the close of Nucor’s most profitable year. However, there is still strong demand in many of our end markets. Nucor’s 2022 year will bring us more profitability, and we are positive of that.”

According to FactSet, earnings per share will drop from $23.23 in this year to $17.31 by 2022. This is according to the consensus. Our belief is that steel will remain more resilient in 2022 than it currently appears. This could be due to the rebound in auto production, as well new investment in oil and natural gas. Nucor stock prices should move in the same way if estimates prove to be incorrect or are revised upwards.

Nucor still buys back tons of stock, which we find pleasing besides the steel forecasts. According to the company, it repurchased 13.5 million shares for an average of $111.63 in the fourth quarter. This activity will continue next year after the Board approved a $4 billion program. The company has just raised its quarterly cash dividend 23%.

Nucor has reached agreement to buy a majority stake in California Steel Industries. Nucor will be paying $400 million to acquire 50% of California Steel Industries’ enterprise value. This price is lower than the historic average EBITDA and puts the ownership in the range of 6x-6x. Nucor will be more present on the West Coast through this deal. This consolidation allows Nucor to increase its capacity without adding any additional capacity.

What do you think of today’s move? While we would prefer a larger number for the quarter, 8.6% of today’s stock price decline is justified due to the relatively small miss. Investors could be alarmed that Nucor has reached its maximum profit, however, Nucor is still a low-cost stock according to market standards.

After booking some profitsWe would purchase Nucor from this fall at $120 late November if it didn’t exist. As we mentioned earlier, we won’t buy lower shares than we bought higher. We wait for an increase in our average cost base of $101.46.

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 (Jim Cramer’s Charitable Trust was long NUE.