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TheStreet Open House

Why AK Steel (AKS) Stock Is Falling Today

NEW YORK (TheStreet) -- Shares of AK Steel Holding Corp,. (AKS) are down -2.71% to $10.40 after the company said its third quarter results will be weighed down by an unplanned furnace outage at a Kentucky plant and lower production levels, according tot the Wall Street Journal.

It said its Ashland Works blast furnace has returned to operation but continues to operate below normal levels. As a result, it plans to accelerate a planned outage to the fourth quarter from the first half of next year, which will hurt its results in the third and fourth quarters.

The company said the 28-day outage, starting in late October, is expected to bring down the company's third quarter results by about $25 million. Fourth quarter results will be affected by as much as $44 million due to repair and lost-production costs.

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AK Steel said it expects shipments to fall by about 3% in the third quarter from the second quarter to 1.35 million tons, and it expects to report a profit of 5 cents to 10 cents a share. Analysts polled by Thomson Reuters projected earnings of 26 cents a share.

The company said strong demand from the automotive industry partly offsets the production slowdown.

TheStreet Ratings team rates AK STEEL HOLDING CORP as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate AK STEEL HOLDING CORP (AKS) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Net operating cash flow has significantly decreased to -$206.10 million or 111.38% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The gross profit margin for AK STEEL HOLDING CORP is currently extremely low, coming in at 10.25%. Regardless of AKS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, AKS's net profit margin of -1.11% significantly underperformed when compared to the industry average.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Metals & Mining industry average, but is greater than that of the S&P 500. The net income increased by 57.7% when compared to the same quarter one year prior, rising from -$40.40 million to -$17.10 million.
  • This stock has increased by 206.93% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the future course of this stock, we feel that the risks involved in investing in AKS do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
  • AK STEEL HOLDING CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, AK STEEL HOLDING CORP continued to lose money by earning -$0.34 versus -$9.10 in the prior year. This year, the market expects an improvement in earnings ($0.05 versus -$0.34).
  • You can view the full analysis from the report here: AKS Ratings Report
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