(Updated for analysts' comment and to reflect stock-price movement.)
WEST CHESTER, Ohio (
surpassed Wall Street expectations for its fourth-quarter results and offered a 2010 outlook that appeared to confirm a steel-industry trend: prices will continue to rise despite the fact that demand, which has improved some during 2009, will remain relatively flat in the months ahead.
The report cheered investors, who sent shares of the company up by more than 7% early in Monday's session. A little more than an hour into the the trading day, AK shares were changing hands at $21.42, up 6%, or $1.23. Volume already exceeded 6 million shares, compared with average daily turnover of about 8 million.
The company reported net income of about $40 million, or 36 cents a share, which includes a $5 million charge "related to a state tax law change in Pennsylvania," the company said in its press release, issued before the opening bell.
Excluding the charge, which amounted to between 4 and 5 cents a share, AK Steel's fourth-quarter EPS stood at about 32 cents. Analysts on average were expecting per-share earnings of 20 cents, according to a Thompson Reuters survey.
Sales, too, bested analysts' estimates. The company posted a top line of $1.32 billion, above the consensus target of $1.25 billion, but less than the year-ago period's $1.46 billion.
AK said its sales came on shipments of 1.37 million tons of steel, more than last year's 1.07 million tons. In its press release, the company attributed the increase to strengthening demand, but noted that average selling prices declined year-over-year.
That trend looks to be changing. AK said it expects first-quarter 2010 shipments to "approximate" the levels it achieved during the fourth quarter. But the company predicts selling prices will rise by 4% to 5% in the current period compared with the final quarter of 2009.
AK said that it benefited from a "significant" LIFO accounting credit in the fourth quarter. In the first period of 2010, however, AK said it would likely take a LIFO charge. That, combined with higher raw materials costs -- the price of iron ore has risen sharply the world over -- will reduce the company's operating profit. AK said it expects to earn $35 per ton of steel shipped in the first quarter, down from the $64 a ton it registered in the just-ended period.
At least one analyst was cautious in the wake of AK's fourth-quarter earnings beat. "Despite this morning's positive surprise, we are maintaining our neutral stance," on the AK stock, wrote Mark Parr, an analyst at KeyBanc Capital Markets, in a note to clients Monday morning.
Parr said he would reevaluate his rating "pending better visibility regarding the ability to fully offset rising raw material costs in the current demand environment, which, although improving, remains sub-optimal for steel price hikes."
AK kicks off a busy week for steelmakers, with bellwethers
reporting fourth-quarter results Tuesday.
-- Written by Scott Eden in New York
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Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining TheStreet.com, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.