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Nucor (New York Stock Exchange:NUE) +3.7% In trading Thursday, Morgan Stanley raised its rating on the stock to Overweight from Equal Weight with a $176 price target, saying the stock has lagged its peers despite the strong earnings growth and cash generation the bank expects in 2025 and 2026.
Based According to the bank's estimates for 2025, Nucor (NEWVICA) is now trading at a discount to Steel Dynamics (STLD) on a relative EV/EBITDA basis and its relative premium on a P/E basis is below the five-year average, which analyst Carlos de Alba says is unjustified given the company's higher earnings growth expected in both his estimates and the consensus.
The analyst also says he prefers Nucor (NUE) over Cleveland-Cliffs (CLF) given the subdued auto production and demand he forecasts for the second half of 2024, which he believes will limit the upside in steel prices and cap Cliffs' earnings rebound.
Finally, the Dodge Momentum Index has seen a resurgence in recent months, suggesting that more projects are entering the construction pipeline, which de Alba said should benefit Nucor (NUE), which has the largest exposure to nonresidential construction among Morgan Stanley's steel coverage.
