) slipped after it revealed its earnings guidance for third-quarter
2014 that fell well short of analyst expectations. The Ohio-based
steel maker said that it expects third-quarter results to be
dragged down by unplanned outage at its Ashland Works blast furnace
AK Steel sees earnings in the band of 5 cents to 10 cents per share
for the third quarter. Analysts polled by Zacks currently expect
earnings of 26 cents per share on an average for the quarter. AK
Steel's shares sagged 6.4% to close at $10.01 yesterday.
AK Steel expects that the outage at the Ashland Works blast furnace
will hurt results in both third and fourth quarter of 2014 with
respect to production, shipments, operating costs and margins. The
outage and the resultant lower-than-normal production levels will
affect the company's third-quarter results by around $25 million,
which has been factored in its guidance for the quarter.
The total unfavorable impact of the outage has been forecast to be
roughly $42 million for the fourth quarter associated with repair
and reduced production expenses. Despite the negative impact of the
outage, AK Steel expects improved financial results on a sequential
basis in the fourth quarter.
AK Steel envisions shipments for the third quarter to be roughly
1,350,000 tons, a 3% fall from 1,398,000 tons shipped in the
previous quarter. The decline reflects reduced production at
Ashland Works, partly masked by sustained strong demand from the
AK Steel also expects average selling price for the third quarter
to be around $1,100 per ton, a modest rise from $1,095 per ton
registered in the second quarter. It expects to gain from
considerably lower iron ore and energy costs in the third quarter.
While the Ashland Works blast furnace has returned to operation, it
continues to operate at production rates that are below its normal
levels. In order to return the blast furnace to normal levels, AK
Steel plans to accelerate a planned outage from first-half 2015 to
fourth-quarter 2014. It will also purchase merchant carbon slabs
and beef up production of carbon slabs at its Butler Works electric
arc furnace to offset a part of the reduced production at Ashland
The planned outage, which will include a reline of the blast
furnace hearth, is now expected to start in late October and last
roughly 28 days. AK Steel expects to spend around $17 million for
the hearth reline.
Separately, AK Steel noted that it has received regulatory
clearance for its planned acquisition of Severstal Dearborn, LLC.
The company now expects to close the acquisition in the third
The buyout of Severstal Dearborn is expected to boost AK Steel's
future earnings and improve its credit profile and liquidity. The
company plans to utilize the operational flexibility enabled by the
addition of the Dearborn blast furnace to cater the needs of its
AK Steel, which currently sports a Zacks Rank #2 (Buy), also
expects the start-up of its iron ore pellet plant at Magnetation in
Other companies in the steel space with favorable Zacks Rank are
Grupo Simec S.A.B. de C.V. (
), TimkenSteel Corp. (
) and POSCO (
). While both Grupo Simec and TimkenSteel hold a Zacks Rank #1
(Strong Buy), POSCO retains a Zacks Rank #2 (Buy).
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AK STEEL HLDG (AKS): Free Stock Analysis Report
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