AK Steel Profits Meet Estimates

AK Steel said steel shipments are expected to rise 5% in the second quarter.
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AK Steel (AKS) - Get Report reported net income of $1.9 million, or 2 cents a share, for the first quarter of 2010. Excluding a non-cash charge of $25.3 million related to federal health care legislation, earnings were $27.2 million, or 25 cents a share, in line with the consensus estimate of per analysts polled by Bloomberg.

AK Steel reported net sales of $1.406 billion for the quarter on shipments of 1.38 million tons, slightly below the $1.408 billion consensus estimate of analysts polled by

Bloomberg

. Sales were up 52.4% from $922.2 million sales reported for the first quarter of 2009 on shipments of 780,000 tons.

The average selling price for the quarter stood at $1,014 a ton, down 14% from $1,184 a ton in the first quarter of 2009, but 5% above $964 a ton in the fourth quarter of 2009. The increase in the average selling price was attributed to a richer product mix and higher surcharges, implying rising raw material costs.

"AK Steel is firmly on the road to recovery," said James Wainscott, chairman, president and CEO. "Our order book for carbon products reflects robust demand, and we are encouraged that our other markets will show steady improvement the balance of the year."

Management anticipates shipments to reach 1.45 million tons for the second quarter of 2010, 5% higher than that in the first quarter with an average selling price that is 5% to 6% higher.

Steel companies across the world announced price hikes over the past month, implying that earnings will likely expand sequentially during the second quarter this year.

Stocks of steel majors have appreciated significantly over the past month suggesting that most of the improving industry outlook is already factored in.

Schnitzer

(SCHN) - Get Report

,

Mechel

(MTL) - Get Report

,

Nucor

(NUE) - Get Report

, and

ArcelorMittal

(MT) - Get Report

led the pack of steel majors with gains of 13.4%, 12.4%, 2.7% and 2.6%, respectively.

AK Steel was one steel stock that registered a decline during the month, losing 5.5%. We reckon that the company will likely be among the winners this quarter.

AK Steel is currently trading at $19.73, down 6.0%, on a price-to-earnings multiple of 14.38. The stock has five buy, eight hold, and one sell ratings, according to

TheStreet's

Analyst ratings guide.

According to analysts polled by

Bloomberg

, the company is set to report earnings of $1.19 a share for 2010 and $1.97 a share for 2011, a significant turnaround against a loss of 68 cents a share in 2009.

U.S. Steel

(X) - Get Report

is trading 1.74% higher, while other U.S. steel majors Nucor and

Steel Dynamics

(STLD) - Get Report

are currently trading down 1.03% and 0.97%, respectively.

After the market closed on Monday, Steel Dynamics reported strong first-quarter earnings of $65 million, or 29 cents a share, a significant improvement over the previous quarter's $27 million, or 12 cents a share, and on a year-to-year basis as well.