Nucor Corporation (NUE) Cash Flow Statement

The consistent OCF/NI ratio above 1.0 suggests that reported earnings are backed by actual cash generation, with non-cash charges like D&A and LIFO adjustments providing a buffer. The Q2 2026 ratio of 1.21, while lower than the 2.11 in Q4 2025, still indicates that cash flow is not being artificially inflated by accruals. This pattern implies that the quality of earnings is high, and investors can rely on cash flows to fund capital returns and growth initiatives.

The trajectory of FCF is closely tied to the steel cycle, with negative FCF in 2025 reflecting both weak pricing and elevated capex. The sharp improvement in Q2 2026, driven by record shipments and better margins, suggests that the company is entering a phase of strong cash generation. However, the FCF margin of 8.0% remains below the 8.5% seen in Q2 2024, indicating that the recovery is not yet at prior peaks. Investors should monitor whether this improvement is sustainable as pricing pressures persist.

The sustained high capex, particularly in 2025 when it averaged over $850 million per quarter, indicates significant investment in growth projects such as the West Virginia sheet mill. The recent decline in capex intensity to 5.5% in Q2 2026 may signal that major projects are nearing completion, which could boost free cash flow in the near term. However, the elevated capital intensity relative to peers like STLD (FCF margin 4.7%) suggests that Nucor is prioritizing long-term capacity expansion over immediate cash returns.

The large fluctuations in working capital are typical for a steelmaker, driven by scrap price movements and shipment timing. The negative working capital changes in most quarters suggest that cash is being tied up in inventory and receivables as volumes grow. The Q2 2026 outflow of $290 million, despite record shipments, may indicate that the company is building inventory in anticipation of continued demand. This pattern implies that working capital management will remain a key swing factor for cash flow, and investors should monitor inventory levels relative to scrap prices.

The company has maintained its dividend, consistent with its Dividend Aristocrat status, but has scaled back buybacks significantly, likely to preserve cash for capex and debt management. The reduction in buybacks from the peak of $1 billion in Q1 2024 suggests a more conservative approach to capital allocation, possibly reflecting management's focus on funding growth projects. With FCF exceeding capital returns in Q2 2026, the company appears to be building cash reserves, which could support future buybacks or acquisitions.

The substantial gap between cumulative OCF and net income indicates that earnings are being understated relative to cash generation, likely due to LIFO accounting and high depreciation. This suggests that the company's true cash-generating ability is stronger than reported profits, which is a positive signal for valuation. However, the gap also reflects the cyclical nature of the business, as working capital swings can distort quarterly comparisons. Investors should recognize that Nucor's cash flow is more stable than its earnings, providing a cushion during downturns.