Critical Contrast: Ternium (TX) vs. Nucor (NUE)

Ternium (NYSE: TX) and Nucor (NYSE:NUE) are both basic materials companies, but which is the superior stock? We will contrast the two businesses based on the strength of their analyst recommendations, valuation, dividends, risk, profitability, earnings and institutional ownership.

Analyst Recommendations

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This is a breakdown of recent ratings and target prices for Ternium and Nucor, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ternium 0 1 4 0 2.80
Nucor 0 5 8 0 2.62

Ternium presently has a consensus target price of $34.00, suggesting a potential upside of 5.69%. Nucor has a consensus target price of $69.27, suggesting a potential upside of 14.31%. Given Nucor’s higher probable upside, analysts clearly believe Nucor is more favorable than Ternium.

Earnings and Valuation

This table compares Ternium and Nucor’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Ternium $9.70 billion 0.66 $886.21 million $4.51 7.13
Nucor $20.25 billion 0.95 $1.32 billion $4.14 14.64

Nucor has higher revenue and earnings than Ternium. Ternium is trading at a lower price-to-earnings ratio than Nucor, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Ternium has a beta of 1.1, indicating that its stock price is 10% more volatile than the S&P 500. Comparatively, Nucor has a beta of 1.51, indicating that its stock price is 51% more volatile than the S&P 500.

Institutional and Insider Ownership

19.0% of Ternium shares are owned by institutional investors. Comparatively, 80.1% of Nucor shares are owned by institutional investors. 0.7% of Nucor shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares Ternium and Nucor’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ternium 9.28% 15.65% 8.50%
Nucor 6.58% 13.03% 7.11%

Dividends

Ternium pays an annual dividend of $1.00 per share and has a dividend yield of 3.1%. Nucor pays an annual dividend of $1.52 per share and has a dividend yield of 2.5%. Ternium pays out 22.2% of its earnings in the form of a dividend. Nucor pays out 36.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Nucor has raised its dividend for 44 consecutive years. Ternium is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Nucor beats Ternium on 10 of the 17 factors compared between the two stocks.

About Ternium

Ternium S.A. manufactures and processes various steel products in Mexico, Argentina, Bolivia, Chile, Paraguay, Uruguay, Colombia, the United States, Central America, and internationally. The company operates in two segments, Steel and Mining. The Steel segment offers steel products, such as slabs, billets and round bars, hot-rolled coils and sheets, bars and stirrups, wire rods, cold-rolled coils and sheets, tin plates, hot dipped galvanized and electrogalvanized sheets, pre-painted sheets, steel pipes and tubular products, beams, roll formed products, and other products. The Mining segment sells iron ore concentrates and pellets. The company serves various companies and small businesses operating in construction, automotive, home appliances, capital goods, container, food, and energy industries. Ternium S.A. was founded in 1961 and is headquartered in Buenos Aires, Argentina. Ternium S.A. is a subsidiary of Techint Holdings S.à r.l.

About Nucor

Nucor Corporation (Nucor) manufactures steel and steel products. The Company produces direct reduced iron (DRI) for use in its steel mills. It operates in three segments: steel mills, steel products and raw materials. The steel mills segment produces and distributes sheet steel (hot-rolled, cold-rolled and galvanized), plate steel, structural steel (wide-flange beams, beam blanks, H-piling and sheet piling) and bar steel (blooms, billets, concrete reinforcing bar, merchant bar, wire rod and special bar quality). The steel products segment produces steel joists and joist girders, steel deck, fabricated concrete reinforcing steel and cold finished steel. The raw materials produces DRI; brokers ferrous and nonferrous metals, pig iron, HBI and DRI; supplies ferro-alloys, and processes ferrous and nonferrous scrap metal. It also processes ferrous and nonferrous metals and brokers ferrous and nonferrous metals, pig iron, hot briquetted iron (HBI) and DRI.

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