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Zacks Industry Outlook Highlights: AK Steel Holding, Allegheny Technologies and Nucor

AKS ATI NUE

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For Immediate Release

Chicago, IL – November 30, 2011 – Today, Zacks Equity Research discusses the Steel, including AK Steel Holding (AKS - Analyst Report), Allegheny Technologies Inc. (ATI - Analyst Report) and Nucor Corporation (NUE - Analyst Report).

A synopsis of today’s Industry Outlook is presented below. The full article can be read at  http://www.zacks.com/stock/news/65436/Steel+Industry+Stock+Outlook+-+November+2011

The commercial metals company AK Steel Holding (AKS - Analyst Report) posted its third-quarter 2011 results, delivering a net loss of $3.5 million or $0.03 cents compared with a net loss of $59.2 million or $0.54 cents during the year-ago quarter. However, results were below the Zacks Consensus Estimate of $0.00 cents per share.

Net sales, as reported by the company, were $1,585.8 million on the shipments of 1,368,800 tons versus $1,575.9 million and 1,465,800 tons in the prior-year quarter. Net sales also missed the Zacks Estimate of $1,662 million. Average selling price for the third quarter of 2011 was $1,158 per ton, up 8% year over year, but down 2% sequentially.

Value-added shipments for stainless/electrical increased to 229.3 tons compared with 226.9 tons in the prior-year quarter. Value-added shipments for Coated, Cold-rolled and Tubular product decreased to 577.2, 278.3 and 32.4 tons, respectively, compared with 624.4, 322.5 and 33.2 tons, respectively, in the year-earlier quarter.

Non-value-added shipments including Hot-rolled increased to 222.6 tons from 213.6 tons in the year-earlier quarter. Non-value-added shipments including secondary products decreased to 29.0 tons from 45.2 tons in the prior-year quarter. AK Steel currently retains a Zacks #3 Rank (short-term Hold rating). Our long-term recommendation also remains Neutral.

Allegheny Technologies Inc. (ATI - Analyst Report) also earned $70.6 million or 63 cents per share (excluding acquisition related expenses of $8.3 million, net of tax) in the third quarter of 2011 up from $1.0 million or 1 cent in the same quarter of 2010. Results exceeded the Zacks Consensus Estimate of 61 cents.

Sales in the quarter increased 28% to $1.35 billion, driven by higher shipments for most high-value products, higher raw material surcharges and increases in average base selling prices for many products. However, sales were lower than the Zacks Consensus Estimate of $1.39 billion.

Segment operating profit surged 157% to $161.8 million, or 12.0% of sales, from $63.0 million, or 6.0% of sales, in the third quarter of 2010.
Allegheny expects to continue to benefit from its new alloys and products, diversified global growth markets and differentiated product mix over the next 3 to 5 years. Demand is expected to be strong for its mill products and highly engineered forged and cast components from the aerospace market.

Strong growth is also expected from the oil and gas/chemical process industry for its titanium-based alloys, nickel-based alloys and specialty alloys, and tungsten products. We currently have a Neutral long-term recommendation on the stock, which is the same as reflected in the Zacks #3 Rank (Hold) rating.

Nucor Corporation (NUE - Analyst Report) reported net earnings of $181.5 million, or 57 cents per diluted share (excluding special items) in the third quarter of 2011, beating the Zacks Consensus Estimate of 51 cents per share. This was a significant increase from $23.5 million, or 7 cents per diluted share (excluding special items) reported in the year-ago quarter. Nucor’s third-quarter earnings exceeded those of last year's quarter, but they declined from the second quarter of this year on lower steel prices and significantly lower metal margins.

Consolidated sales surged 27% year over year to $5.25 billion, beating the Zacks Consensus Estimate of $4.86 billion. The growth was attributable to an increase of 24% in average price per ton and a rise of 3% in shipments (to 5.8 million tons) to outside customers. The company’s end-markets such as automotive, heavy equipment, energy and general manufacturing demonstrated strength compared to 2010 but showed very little improvement compared with the first half of 2011.

Steel mill shipments grew 9% to 4.2 million tons during the quarter. The average scrap and scrap substitute cost per ton accelerated 27% to $449.

Although Nucor expects to see only slight improvement in demand in its non-residential construction markets through the end of 2011, it remains optimistic about its combined construction businesses (steel mills and downstream facilities) and anticipates that it will continue to operate profitably.

Nucor expects fourth-quarter earnings to be below its third-quarter level. The company expects margin compression in the sheet market in the fourth quarter of 2011. Furthermore, the company forecasts a smaller compression in plate margins due to imports. The magnitude of margin compression will be favorably impacted by expected lower scrap costs through the quarter.

The company has a Zacks #3 Rank (Hold) on its stock.

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