We have retained our Neutral recommendation on
AK Steel Holding
). We remain cautious factoring in the challenging operating
backdrop in overseas markets, softness in the construction market
and the weak steel pricing environment.
The steel maker slipped to a bigger loss in fourth-quarter 2012,
hit by hefty pension and tax charges, along with weak pricing.
Adjusted loss per share, however, beat the Zacks Consensus
Estimate. Weak steel demand and pricing hurt sales in the
AK Steel is expected to benefit from strength in the automotive
market and higher shipment of steel products to automakers. The
company increased its automotive business by around 20% last
year. It expects to continue to gain market share in 2013.
The company is also investing to procure about half of its iron
ore and coal requirements internally. It is making good progress
with its coal mine plan and expects to begin mining activities in
the first half of 2013. It is also making significant progress
with its iron ore pellet project at Magnetation. Both these
strategic investments are expected to improve the company's cost
structure and strengthen its position in the years ahead.
Moreover, AK Steel should benefit from the favorable pricing
trend for key raw materials such as iron ore, coke and coal.
Declining prices for these inputs should acts in its favor.
However, AK Steel is contending with weak steel demand,
oversupply in the industry and pricing pressure. Weak economic
conditions affected demand and steel pricing in the fourth
AK Steel is also hamstrung by weak construction and housing
sectors. Moreover, it is exposed to macroeconomic uncertainties,
stemming from the recessionary conditions in Europe and sluggish
growth in Asia. AK Steel also has significant pension fund
AK Steel currently carries a short-term (1 to 3 months) Zacks
Rank #3 (Hold).
Other Stocks to Consider
Other companies in the steel industry worth considering are
Gibraltar Industries Inc.
Commercial Metals Company
). All of them hold a Zacks Rank #2 (Buy).
AK STEEL HLDG (AKS): Free Stock Analysis
COMMERCIAL METL (CMC): Free Stock Analysis
POSCO-ADR (PKX): Free Stock Analysis Report
GIBRALTAR INDUS (ROCK): Free Stock Analysis
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