AK Steel remains unattractive

The producer is trying to combat poor conditions by boosting prices.

By Zacks.com Jul 10, 2012 9:10AM

By Zacks Equity Research


AK Steel (AKS) has not had a good year so far. It turned in a loss in the first quarter, issued a muted guidance for the second quarter, had its rating slashed by Standard and Poor's recently, and its stock has lost one-fourth of its value. To counter this negativity, the company has decided to implement a price increase.

 

AK Steel is increasing the current spot market base prices by $40 per ton for all its carbon flat-rolled steel products. The revised prices are already in effect, and all new orders will be charged at the new price.

 

The company had the luxury of improved pricing in the first quarter, as average selling price rose 6% sequentially and 3% year over year. However, AK Steel will not see the benefits of rising prices in this quarter if we are to go by the issued guidance.

 

AK Steel had attributed its disappointing guidance for the second quarter to macroeconomic weakness and falling spot prices. Its prospects might be jeopardized further due to increasing imports in the domestic markets along with industry oversupply due to ramping up of operations by other steelmakers. This would probably lead to further deterioration in prices and hurt margins.

 

In addition, weakness in the construction and housing sectors, a high fixed cost structure and sluggish growth in Asian markets are factors that might have a negative bearing on AK Steel's performance. Moreover, uncertainties out of Europe and considerable pension fund requirements are additional hurdles for AK Steel.

 

We currently have a long-term "underperform" recommendation on AK Steel. The company, which competes with Nucor (NUE), U.S. Steel (X) and Steel Dynamics (STLD), holds a short-term Zacks #5 Rank ("strong sell").

 

More from Zacks.com

0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

111
111 rated 1
272
272 rated 2
474
474 rated 3
656
656 rated 4
638
638 rated 5
699
699 rated 6
623
623 rated 7
486
486 rated 8
260
260 rated 9
128
128 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
DYNDYNEGY Inc10
TAT&T Inc9
VZVERIZON COMMUNICATIONS9
EXCEXELON CORPORATION8
AAPLAPPLE Inc10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.