Nucor's Decelerating ROCE and Capital Employed Growth: A Cause for Concern?

Nucor's return on capital employed (ROCE) has decelerated to 7.1%, underperforming the Metals and Mining industry average of 11%. Despite a 79% increase in capital employed over the last five years, returns on capital have remained stable, indicating that the company's investments do not provide a high return on capital. Investors should be cautious and consider other options with better ROCE trends.

Nucor Corporation (NUE) has seen its return on capital employed (ROCE) decelerate to 7.1%, underperforming the Metals and Mining industry average of 11%. Despite a significant 79% increase in capital employed over the last five years, Nucor's returns on capital have remained relatively stable, indicating that the company's investments may not be yielding the desired high returns [1].

This development is notable given the broader industry trends and the recent market activity surrounding Nucor. Analysts have mixed views on Nucor, with Jefferies rating it a "Strong Buy" and J.P. Morgan a "Buy," reflecting optimism despite the technical signals suggesting caution [1]. The company's recent price rise of 4.14% and positive analyst coverage have been tempered by bearish technical indicators such as the MACD Death Cross and WR Overbought, which have dominated the recent chart [1].

Institutional investors have shown caution, with a slight net outflow of 0.49, contrasting the positive price action from small and medium investors [1]. This mixed picture suggests that while there is some optimism in the market, investors should be wary of the short-term volatility and wait for clearer signals before committing to long positions.

Nucor's recent earnings report for the second quarter of 2025 showed mixed results. The company reported earnings of $2.60 per share, missing the Zacks Consensus Estimate of $2.62, but saw net sales of roughly $8.46 billion, up around 4.7% year over year [4]. The company's financial position remains strong, with cash and cash equivalents of roughly $1.95 billion at the end of the quarter, although long-term debt has increased to around $6.69 billion [4].

Berkshire Hathaway Class B (BRK.B) has significantly increased its stake in Nucor, aligning with the company's housing recovery bets through subsidiaries like Clayton Homes. This move suggests confidence in the cyclical rebound of construction materials and housing demand, despite the sector's inherent volatility [2]. However, Warren Buffett's partial divestment of Apple shares may reflect concerns over Apple's valuation and growth, with Berkshire's cash reserves now exceeding $344 billion [2].

Given the current situation, investors should be cautious and consider other options with better ROCE trends. Nucor's recent performance and technical signals suggest that the path of least risk is to watch and wait for clearer momentum before committing to long positions.

References:

[1] https://www.ainvest.com/news/stock-analysis-nucor-outlook-mixed-signals-investor-caution-volatile-market-2508/
[2] https://www.ainvest.com/news/berkshire-hathaway-class-stock-plunges-trading-volume-26th-market-strategic-portfolio-shifts-nucor-bet-2508/
[3] https://www.morningstar.com/stocks/xnys/nue/quote
[4] https://finance.yahoo.com/news/why-nucor-nue-5-2-153004601.html