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AK Steel Poised on Strategic Actions Amid Pricing Pressure

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We issued an updated research report on AK Steel Holding Corporation (AKS - Free Report) on Nov 22.
 
The steel maker missed earnings and sales estimates in third-quarter 2017. The company reported adjusted earnings of 2 cents per share for the quarter, missing the Zacks Consensus Estimate of 3 cents.  
 
The company recorded net sales of $1,494.3 million for the quarter, up 2.8% from the year-ago quarter. However, sales missed the Zacks Consensus Estimate of $1,504 million.
 
Shares of AK Steel have declined 16.6% in the last six months, underperforming the industry’s 12.5% growth.
 
 
 
AK Steel is expected to benefit from strong demand in the automotive market. AK Steel remains focused on expanding its core automotive business and is laying importance on de-emphasizing commoditized products and launching new value-added products. The company is currently developing third-generation, advanced high-strength carbon steels for automotive customers that are considerably stronger than current product offerings.
 
AK Steel, in August, completed the acquisition of Precision Partners Holding Company for $360.9 million in cash. The buyout combines AK Steel’s innovation in materials and metals-forming and Precision Partners' tooling and stamping technology and advanced capabilities.  The acquisition is in sync with AK Steel's commitment to broaden its portfolio of high-value products and processes and reinforces collaboration with the company’s automotive market customers.
 
The company’s sustained initiative to manage costs amid a challenging operating environment is also expected to lend support to its bottom line. AK Steel is looking for cost-saving opportunities in 2017 through a number of means including process improvement, headcount cuts, reduction in process time and procurement activities.
 
However, AK Steel is exposed to raw material pricing pressure. Electrical steel prices also remain under pressure in overseas markets due to global overcapacity. Moreover, the U.S. market is still seeing high levels of imports of steel products. Some additional headwinds are expected to come from spending associated with planned maintenance outages. 
 
AK Steel Holding Corporation Price and Consensus
 

AK Steel Holding Corporation Price and Consensus | AK Steel Holding Corporation Quote

 

Zacks Rank & Stocks to Consider

AK Steel currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Ingevity Corporation (NGVT - Free Report) , Koppers Holding Inc. (KOP - Free Report) and Westlake Chemical Corporation (WLK - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ingevity has expected long-term earnings growth of 12%. Its shares have gained 37% year to date.

Koppers Holding has expected long-term earnings growth of 18%. Its shares have rallied 20.4% year to date.

Westlake Chemical has expected long-term earnings growth of 10.6%. Its shares have moved up 69.3% year to date.

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