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AK Steel (AKS) Down 18.6% Since Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for AK Steel Holding Corporation (AKS - Free Report) . Shares have lost about 18.6% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

AK Steel's Earnings and Revenues Beat Estimates in Q2

AK Steel topped earnings and sales estimates in second-quarter 2017. The company reported net income of $61.2 million or $0.19 per share, up 253.7% from net income of $17.3 million or $0.08 recorded in the prior-year quarter. Earnings for the quarter surpassed the Zacks Consensus Estimate of $0.13.  

Total operating costs in the reported quarter rose around 1.3% year over year to roughly $1,447.7 million.

The company recorded net sales of $1,557.2 million for the quarter, up 4.3% from the year-ago quarter. Sales surpassed the Zacks Consensus Estimate of $1,530 million.

Pricing and Shipments

Shipments for the quarter were down around 6% year over year to 1,465,200 tons, mainly due to decrease in automotive demand. Average selling price per ton rose 11% year over year to $1,058 in the quarter mainly due to higher surcharges on specialty steel products and increased average selling prices on both spot and contract market sales.
 
Financials

AK Steel exited the quarter with cash and cash equivalents of $136 million and $1.3 billion available under its revolving credit facility. During the second quarter, the company reduced long-term debt by $129.8 million. Cash flows from operating activities were $203.2 million for the first half of 2017.

Outlook

According to AK Steel, the second-quarter performance reflects continued benefits obtained through strategic initiatives implemented over the past one-and-a-half year. The acquisition of Precision Partners will help to strengthen its position as a value-added design and materials solutions provider.

The company expects shipments in the third quarter to be relatively flat compared to the second as higher shipments of the carbon distributing and converting market are expected to be offset by lower automotive shipments. Average selling price in the third quarter is expected to be modestly lower than the second quarter. The expected decline assumes a change in the mix of shipments related to an anticipated reduction in automotive shipments and decline in raw material surcharges.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.

AK Steel Holding Corporation Price and Consensus

 

VGM Scores

At this time, the stock has a strong Growth Score of A, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable for value and growth investors.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.




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