President Joe Biden wants to slam China with new protectionist measures that would triple the current tariff of 7.5% levied on its exports of steel to the U.S. This announcement could benefit American steel companies amid a robust economy and higher infrastructure spending. Nucor (NYSE:NUE), the leading U.S. steel producer, is poised to gain from this announcement.
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The company will report second-quarter earnings next week, and speculation suggests that they may surprise on the high side.
Nucor Is Solid in All Economic Climates
The steel industry has faced unrelenting challenges in recent years, including global overcapacity, trade tensions, and pandemic-related slowdowns.
However, leading U.S. steel producers, like Nucor, have demonstrated remarkable resilience. Nucor, the largest steelmaker in North America, boasts a diversified business model that has allowed it to weather economic storms. This diversification, encompassing both steel production and manufacturing divisions, has positioned Nucor for consistent growth.
Nucor’s Strategic Diversification
Nucor’s CEO, Leon Topalian, recently highlighted the company’s strategic focus on expanding into various economic sectors. This approach, targeting industries like automotive, agriculture, energy, and “all the megatrends,” positions Nucor for future success.
The ongoing global economic recovery is fueling increased manufacturing and construction activity, creating fertile ground for Nucor’s growth. On April 16th, JPMorgan (NYSE:JPM) raised its price target on Nucor to $195 from $180. The firm believes that Nucor’s fully operational steel mills may experience stronger-than-expected shipments in the automotive sector.
Infrastructure Bill and Domestic Manufacturing
Before Biden’s call to triple tariffs on Chinese steel, his administration’s $1 trillion infrastructure bill and “America first” stance had already boosted domestic manufacturing, creating ample opportunities for U.S. steel companies.
Nucor continues to benefit directly from these initiatives, particularly with the expected surge in steel demand for infrastructure projects and the construction of new semiconductor facilities within the U.S.
Is NUE a Good Stock to Buy?
On TipRanks, NUE stock has a Moderate Buy consensus rating based on five Buys, two Holds, and one Sells. The analysts’ average price target on NUE stock of $196.75 translates to a potential 4.39% upside. Over the past six months, shares of the company have gained about 33.6%.
Key Takeaway
For those seeking to diversify their portfolios away from tech-heavy holdings, Nucor offers a compelling alternative. As a leading U.S. steel producer with a diversified business model, Nucor is well-positioned to capitalize on the current economic climate and reap the benefits of government policies promoting domestic manufacturing and infrastructure development.
The potential addition of tariffs on Chinese steel further strengthens the bullish case for Nucor and the U.S. steel industry as a whole.
