Nucor's Guidance Cut: A Tactical Play on the Q4 Earnings Gap

The immediate event is a stark guidance cut. Nucor has set its fourth-quarter earnings per share in a range of $1.65 to $1.75. That's a massive sequential decline from the $2.63 it earned in the third quarter. The company explicitly attributes the drop to seasonal effects, fewer shipping days, lower volumes, and margin compression-especially in sheet steel. The consensus estimate for the quarter was $2.07, which the guidance clearly misses.

This isn't just a minor miss; it's a fundamental shift in the quarterly trajectory. The stock's reaction was telling: in the latest session, NUE was down 1.78% while the S&P 5050 gained 0.79%. The market is pricing in a significant earnings contraction.

The broader context is one of sustained weakness. The latest ISM manufacturing PMI fell to 47.9 in December, indicating a fourth straight month of contraction. This economic backdrop of falling new orders and declining employment weighs heavily on industrial demand, the core driver for steel.

So the core investment question is tactical: is this a fundamental deterioration in Nucor's business, or a temporary mispricing driven by a severe seasonal and operational hiccup? The guidance cut is the catalyst, but the market is asking whether the underlying demand slump is deeper than the company's seasonal explanation suggests.

The Setup: Valuation vs. Near-Term Pain

The valuation now sits at a clear crossroads. Nucor trades at a price-to-earnings ratio of 22.82. That multiple looks elevated against the guidance-driven Q4 EPS range of $1.65 to $1.75, which implies a trailing P/E that would be in the high teens. Yet, it's still well below the 52-week high of $168.07. The stock's current price around $157.83 offers a buffer, sitting roughly 10% above its 52-week low of $97.59.

This buffer is crucial. The year-over-year math is stark: the midpoint of the Q4 guidance, $1.70, represents a 39% increase from the $1.22 earned in the same quarter last year. The market is pricing in a severe sequential drop, not a collapse in annual profitability. The core question is whether the current valuation is pricing in too much near-term pain.

The near-term sentiment headwind is clear. Just last month, Morgan Stanley downgraded the stock to Equalweight. This adds to the pressure, as the stock's recent 8% monthly gain has underperformed its sector. The setup is a classic event-driven tension: a premium multiple is being challenged by a guidance cut that misses consensus, while the underlying business still shows strong year-over-year growth. The risk is that the seasonal explanation proves inadequate, and the demand contraction deepens. The reward is that the valuation may already reflect a significant portion of the expected Q4 earnings drop, leaving room for a rebound if the company's optimistic comments about backlogs and policy improvement start to materialize.

The Catalyst: Earnings on January 26th

The uncertainty created by the guidance cut will be resolved in just over two weeks. Nucor will report its fourth-quarter results and provide an updated outlook for 2026 on January 26, 2026. A follow-up earnings call is scheduled for the next day.

This event is the definitive test for the stock's near-term direction. The market will be watching for two key signals. First, does the actual Q4 earnings per share fall within the company's own $1.65 to $1.75 guidance range? A miss here would validate the worst-case seasonal scenario. Second, and more critically, will management's commentary on 2026 pricing and demand hold firm? The company's earlier statement pointed to a positive outlook for next year, but the broader context is one of contraction. The latest ISM manufacturing PMI fell to 47.9 in December, indicating a fourth straight month of contraction. This economic backdrop of falling new orders and declining employment weighs heavily on industrial demand.

The stock's reaction will hinge on whether the Q4 guidance miss is seen as a one-quarter reset or the start of a longer-term trend. If management can articulate a clear path to regaining margins in sheet steel and maintaining pricing power, the current valuation may already be too pessimistic. If, however, the commentary acknowledges that the demand slump is deeper and more prolonged, the seasonal explanation may be insufficient, and the stock could face renewed pressure. The January 26th report is the catalyst that will separate tactical opportunity from fundamental deterioration.