On Apr 3, we issued an updated research report on steel maker
AK Steel Holding Corporation
). While the company should benefit from strong momentum in the
automotive market in 2014, it is expected to face challenges in
the first quarter.
AK STEEL HLDG (AKS): Free Stock Analysis
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AK Steel, a Zacks Rank #3 (Hold) stock, posted healthy
fourth-quarter 2013 results on Jan 28. The company swung to
profit in the quarter on the back of a tax benefit. Adjusted
earnings topped the Zacks Consensus Estimate. Sales rose on
higher shipments and beat expectations.
AK Steel is expected to benefit from strength in the automotive
market and higher shipment of steel products to automakers.
Automotive contribution to the company's revenues was 51% in
2013, higher than 45% achieved a year ago.
AK Steel is expected to continue to gain automotive market share,
driven by continued healthy demand for its carbon and specialty
steel products. The company expects higher shipment of carbon and
stainless steel products to the automotive market in 2014.
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 recently provided downbeat guidance for
first-quarter 2014. It is expected to incur a loss in the quarter
mainly due to higher energy costs and an unplanned outage at its
Ashland Works blast furnace. The cost of natural gas and
electricity is expected to increase due to cold weather. Steel
shipments are expected to fall sequentially in the quarter.
AK Steel remains exposed to macroeconomic uncertainties, stemming
from lingering challenges in Europe. Oversupply in the steel
industry and pricing pressure remain as overhangs.
Other Stocks to Consider
Other companies in the steel and related industries with
favorable Zacks Rank include
Norsk Hydro ASA
). While NN holds a Zacks Rank #1 (Strong Buy), both Norsk Hydro
and NSK retain a Zacks Rank #2 (Buy).