There's been plenty of talk among investing pundits about who could end up being the winners and losers this election season. Companies in some sectors will likely be favored over others depending on the next U.S. president and the makeup of Congress.
But one is company set up to win regardless of who wins in the upcoming election is Nucor(NYSE: NUE). North America's largest steel and steel products company has tailwinds from both outside and within that shareholders can benefit from in the coming years.
Smart capital spending
Nucor has spent the last eight years ramping up investments to grow its business. The company, which recently had a market cap of about $35 billion, has invested nearly $15 billion for growth investments. These projects and acquisitions are already boosting Nucor's earnings prospects through the normal business cycles and there are more coming online in 2025 and 2026. The below chart shows the steady flow of capital it has committed for new growth projects and acquisitions since 2017.
Data source: Nucor. Chart by author.
Investors are also being rewarded by Nucor's management. CEO Leon Topalian summed up the capital returns to shareholders over the first nine months of 2024 in the recent Q3 conference call: "Through September, Nucor has returned $2.3 billion to shareholders through our share repurchases and dividends, and we've completed $2.3 billion of capital expenditures. All of this has been funded with operating cash flow and cash on hand, which ended the quarter at approximately $4.9 billion."
Set up for success
The investments being made by Nucor have also been strategic. Nucor has products for virtually all infrastructure projects, energy grid work, and data center construction. It expects to finish construction on two new, highly automated utility tower manufacturing facilities next year. Nucor also plans to commission a steel sheet coating line designed for value-added automotive products in 2026. Its largest ongoing project -- a new state-of-the-art sheet mill in West Virginia -- should also be completing construction in 2026. Additionally, it is in the midst of ramping up its new Brandenburg, Kentucky, plate mill to full production across all product ranges.
And Nucor notably created a data system segment to serve the fast-growing data center construction market. One of the company's acquisitions this year was a manufacturer and installer of data center infrastructure. This is essentially a new market for growth.
Some Wall Street analysts think demand for artificial intelligence (AI) data center construction will remain strong for the foreseeable future. Large technology companies have indicated they plan to continue to spend heavily in that area. Susquehanna analyst Christopher Rolland recently reiterated positive views of several AI-related companies, according to Barron's. Rolland noted, "For AI, checks remain solid, and we expect hyperscaler [cloud computing providers] capex revisions to support 2H and into next year."
Nucor shareholders should benefit
Those projects are just one trigger that could help Nucor stock regain its recent highs. Shares have declined by more than 25% since the stock hit an all-time high of just over $200 per share earlier this year. But with its ongoing capital projects that have begun to pay off and with new ones adding to its profits in the near future, that looks like an opportunity for investors.
The company has a record of returning capital to shareholders. Infrastructure projects are receiving support from the federal government through the Bipartisan Infrastructure law, the CHIPS and Science Act, and other measures. That should lead to an increasing amount of earnings potential over the normal steel cycles, and Nucor shareholders should benefit from that, regardless of how the upcoming election goes.
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Howard Smith has positions in Nucor. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
