BMO upgrades Nucor on compelling valuation, upside from tariff

Investing.com -- BMO Capital Markets upgraded Nucor Corp (NYSE: NUE) saying the stock currently trades at a "compelling" valuation, with long-term growth potential amid the recently announced U.S. steel tariffs.

Nucor rating was bumped Outperform from Market Perform.

Nucor is executing a multi-year organic growth strategy aimed at expanding both capacity and product capabilities, which BMO said should support stronger through-cycle profitability and free cash flow.

The firm raised its price target to $145, citing a higher valuation multiple.

“We recognize the tariff situation remains fluid (can change rapidly), but with the shares currently trading at 5.5x 2026E EV/EBITDA, in our view valuation is compelling,” the analysts wrote.

The brokerage highlighted several investments, including Nucor’s new 3 million tons per year sheet mill in West Virginia, rebar expansion projects in Lexington and the Pacific Northwest, and added galvanizing capacity expected to reach 1 million tons per year by 2027.

These projects could contribute an estimated $1.5 billion to $2.0 billion in incremental EBITDA once fully ramped.

Nucor has a relatively low mill utilization rate, 80% in the first quarter compared to 89% for its closest peer, as a source of potential volume upside.

The company’s diversified product mix, including structural and coated products, is seen as well-positioned to benefit from the Biden administration’s proposed doubling of steel tariffs.

While the tariff environment is fluid and subject to change, it said the policy shift could provide additional upside to Nucor’s growth trajectory if maintained.

Nucor shares have underperformed year-to-date to its peers. BMO said while a discount is justified, the current level presents an attractive risk-reward.

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