On Nov 8, we reiterated our Neutral recommendation on
AK Steel Holding Corporation
). While the company should gain from healthy automotive demand
and its strategic raw material investments, we maintain a
cautious stance considering the weak steel pricing environment
and a challenging operating backdrop in overseas markets.
The steel maker posted narrower third-quarter 2013 loss on Oct
22. Adjusted loss per share was lower than the Zacks Consensus
Estimate. However, sales fell due to lower shipments and missed
the Zacks Consensus Estimate. The company expects results to
improve sequentially in the fourth quarter.
AK Steel, a Zacks Rank #3 (Hold) stock, is expected to benefit
from strength in the automotive market and higher shipment of
steel products to automakers. It is expected to continue to gain
automotive market share, driven by continued healthy demand for
its carbon and specialty steel products.
AK Steel is also investing to procure about half of its iron
ore and coal requirements internally. It is making good progress
with its first coal mine at AK Coal and is ramping up mining
volumes. AK Steel 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.
However, AK Steel is exposed to macroeconomic uncertainties,
stemming from lingering crisis in Europe. It is also contending
with oversupply in the industry and pricing pressure. Electrical
steel prices remain under pressure in overseas markets given the
challenging operating environment.
A weak European economy and slowing growth in Asia are
impacting AK Steel's electrical steel business. While
construction and housing sectors have shown signs of revival of
late, they are still not out of the woods. Moreover, maintenance
outage costs associated with the Middletown Works blast furnace
will continue to weigh on AK Steel's bottom line in the fourth
quarter, albeit to a lesser extent than what witnessed in the
Other Stocks to Consider
Other steel producers with favorable Zacks Rank are
Companhia Siderurgica Nacional
Shiloh Industries Inc.
Unites States Steel Corp.
). While both Companhia Siderurgica and Shiloh Industries hold a
Zacks Rank #1 (Strong Buy), United States Steel carries a Zacks
Rank #2 (Buy).
AK STEEL HLDG (AKS): Free Stock Analysis
SHILOH INDS INC (SHLO): Get Free Report
CIA SIDERUR-ADR (SID): Free Stock Analysis
UTD STATES STL (X): Free Stock Analysis
To read this article on Zacks.com click here.