These Three Steel Producers Took a Dive on Tuesday

NEW YORK (TheStreet) -- AK Steel (AKS), United States Steel Corporation  (X) and Companhia Siderurgica Nacional (SID) tumbled on Tuesday after iron ore prices fell to their lowest level in six months. The steel producers took a dive on data out of China which showed weakening demand for iron ore, a key component of steel, and slowing steel production.

Benchmark Chinese iron ore prices slipped nearly 2% to $124.80 a tonne, contributing to a loss of more than $10 a tonne since the beginning of the year.

A commodities report from Capital Economics noted the price of copper, iron ore and steel prices will continue to fall over 2014 on an imbalance of supply growth versus demand for the product.

By late afternoon, AK Steel had dipped 3.1% to $6.79, United States Steel Corporation was 2.1% lower to $26.84, and Brazil-based Companhia Siderurgica Nacional dropped 8.9% to $5.36.

TheStreet Ratings team rates COMPANHIA SIDERURGICA NACION as a Hold with a ratings score of C. The team has this to say about their recommendation:

"We rate COMPANHIA SIDERURGICA NACION (SID) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, a generally disappointing performance in the stock itself and generally higher debt management risk."

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

  • SID's revenue growth has slightly outpaced the industry average of 3.9%. Since the same quarter one year prior, revenues rose by 13.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to the other companies in the Metals & Mining industry and the overall market, COMPANHIA SIDERURGICA NACION's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • COMPANHIA SIDERURGICA NACION reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, COMPANHIA SIDERURGICA NACION swung to a loss, reporting -$0.14 versus $1.36 in the prior year. This year, the market expects an improvement in earnings ($0.93 versus -$0.14).
  • The debt-to-equity ratio is very high at 3.67 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, SID has managed to keep a strong quick ratio of 2.09, which demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has decreased to $272.23 million or 32.78% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

TheStreet Ratings team rates AK STEEL HOLDING CORP as a Sell with a ratings score of D. The 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 -$119.20 million or 53.21% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The gross profit margin for AK STEEL HOLDING CORP is currently extremely low, coming in at 10.34%. 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 -2.38% significantly underperformed when compared to the industry average.
  • AKS, with its decline in revenue, underperformed when compared the industry average of 3.9%. Since the same quarter one year prior, revenues slightly dropped by 9.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • AK STEEL HOLDING CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, AK STEEL HOLDING CORP reported poor results of -$9.10 versus -$1.41 in the prior year. This year, the market expects an improvement in earnings (-$0.56 versus -$9.10).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Metals & Mining industry. The net income increased by 47.9% when compared to the same quarter one year prior, rising from -$60.90 million to -$31.70 million.

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

"We rate UNITED STATES STEEL CORP (X) a SELL. This is driven by a number of negative factors, 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 feeble growth in its earnings per share, deteriorating net income, generally high debt management risk, disappointing return on equity and weak operating cash flow."

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

  • UNITED STATES STEEL CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, UNITED STATES STEEL CORP reported poor results of -$0.97 versus -$0.59 in the prior year. For the next year, the market is expecting a contraction of 30.9% in earnings (-$1.27 versus -$0.97).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Metals & Mining industry. The net income has significantly decreased by 4170.4% when compared to the same quarter one year ago, falling from $44.00 million to -$1,791.00 million.
  • The debt-to-equity ratio is very high at 2.22 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, X maintains a poor quick ratio of 0.81, which illustrates the inability to avoid short-term cash problems.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Metals & Mining industry and the overall market, UNITED STATES STEEL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to $37.00 million or 61.85% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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