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AK Steel Holding Corporation ( AKS - Analyst Report ) issued guidance for the first quarter of 2012 and also provided a brief idea of what investors might see in the second quarter of 2012. The company apprehends that there would be a loss in the first quarter of 2012 in the range of 11 cents per share to 15 cents per share.
The loss would however be lesser than the loss of 26 cents reported by the company in the fourth quarter of 2011. The Zacks Consensus Estimate for the first quarter of 2012 is a profit of 3 cents per share.
The company’s shipments are estimated to fall by about 7% from the last quarter to 1.31 million tons in the first quarter of 2011. However, AK Steel forecasts the average per ton selling price to be higher compared with the sequential quarter due to an increase in spot market pricing and also an improving product mix. The company also expects its last in first out (LIFO) credit for the upcoming quarter to be lower than what it had recorded in the fourth quarter.
The company forecasts that the automotive market in the second quarter of 2012 will perform well benefiting the company. The company further anticipates that the shipments will also be more in the second quarter and the operating rate will also be higher.
AK Steel expects the raw material costs to be lower in the second quarter versus the first quarter of 2012. As a result, the company expects to deliver profits in the second quarter.
In January 2012, AK Steel posted its fourth-quarter 2011 results, net sales of $1,509.2 million on the shipments of 1,409,900 tons versus $1,390.6 million on shipments of 1,359,900 tons in the prior-year quarter. It was ahead of the Zacks Estimate of $1,481 million.
Average selling price for the quarter was $1,070, up 5% year over year, but down 8% sequentially. In 2011, sales were $6,468.0 million, up 8% year over year. Shipments were 5,698,800 tons versus 5,660,900 tons in 2010.
AK Steel is uniquely positioned to focus on products with high margins. Electrical steel continues to be the company’s strongest product line, with demand recovering in the U.S. and abroad, though at a slower rate. The company is operating its plants at above 80% capacity and is well positioned to serve the end markets when the demand rebounds.
The company experienced a tough fourth quarter due to the economic downturn and escalating raw material prices. However, currently the company is witnessing increased demand for its carbon steel products and thus has been raising prices in the spot market to recover high steelmaking input costs.
The company is also witnessing improved demand from the automotive sector. However the uncertain economic environment and higher raw material costs remain concerns. All said, we feel that the company will perform better in the first quarter of 2012 compared with the previous quarter.
A K Steel currently retains a Zacks #3 Rank (short-term Hold rating). The company competes with Nucor Corporation ( NUE - Analyst Report ) , U.S. Steel Corp. ( X - Analyst Report ) and Steel Dynamics Inc. ( STLD - Snapshot Report ) .
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