NEW YORK (TheStreet) -- AK Steel (AKS) shares closed down 3.61% to $8.01 on Tuesday alongside the decline of fellow steel company U.S. Steel (X) after a bleak note from Axiom Capital, which warned that U.S. Steel could be facing troubled waters ahead.
The firm believes that U.S. Steel could report earnings below expectations due to increased inventories, plummeting scrap prices and increasing U.S. steel imports. The latter two reasons for the pessimism are industry wide problems.
U.S. Steel shares closed trading down $3.59% to $39.17 on Tuesday.
Separately, 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 several 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 110.72% 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 (-$0.25 versus -$0.34).
- You can view the full analysis from the report here: AKS Ratings Report