Behind This Steel Stock's Billion-Dollar Acquisition News

NUE acquires C.H.I. Overhead Doors

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Nucor Corporation (NYSE:NUE) and its affiliates are manufacturers of steel and steel products, with operating facilities in the United States, Canada, and Mexico. Products produced include carbon and alloy steel in bars, beams, sheet, and plate, among many others. The steel company is also North America's largest recycler. Ahead of the open, NUE is trading up 2% at $108.10.

On June 24, Nucor Corporation announced that it completed the acquisition of C.H.I. Overhead Doors from KKR & Co. (KKR) for $3 billion. C.H.I. manufactures overhead door products for the residential and commercial markets in the United States and Canada, as well as rolling steel and rubber doors for commercial and industrial customers. The overhead door company has approximately 800 teammates across two manufacturing plants in Illinois and Indiana, and regional warehouses located in California, Colorado, New Hampshire, and New Jersey.

Nucor stock has increased about 9% year-over-year and is currently trading up 21% since dropping to a 52-week low of $87.71 last summer. However, shares of NUE have dropped in price 6% year-to-date and are down 19% over the past month. Additionally, Nucor stock has decreased 44% since peaking at a record high of $187.90.

As a result, Nucor stock now provides an extremely low valuation at a forward price-earnings ratio of 4.26 and a price-sales ratio of 0.76. NUE also offers a dividend yield of 1.89% with a forward dividend of $2.00. Moreover, the steel company is estimated to complete fiscal 2022 with 15.9% revenue growth and 13.2% earnings growth.

NUE, however, has lacked consistency with its top- and bottom-line growth in previous years. Notably, Nucor reported a 10% decrease in revenue and a 46% decrease in net income for fiscal 2019. That was preceded by an 11% decline in revenue and a 43% decline in net income for fiscal 2020. In addition, NUE is expected to see a 19.3% drop in revenue and a 54% decrease in earnings for fiscal 2023, making Nucor stock's fundamentals too unpredictable in the long run.

An unwinding of options traders' pessimism could put more wind at the stock's sails, as puts are being picked up at an exceptional rate. This is per NUE's 50-day put/call volume ratio of 1.06 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands higher than 81% readings from the past 12 months.

Mirroring this sentiment, short-term options traders have rarely been more put-biased than they currently are. This is per Nucor stock's Schaeffer's put/call open interest ratio (SOIR) of 1.35, which stands in the 78th percentile of annual readings.

It's also worth noting that the equity's Schaeffer's Volatility Scorecard (SVS) stands at 97 out of 100. This elevated score indicates NUE has exceeded options traders' volatility expectations over the past year -- a boon for premium buyers.

 

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