Here's a Factor Driving AK Steel (AKS) Stock Down Today

NEW YORK (TheStreet) -- Shares of Ohio-based steel maker AK Steel Holding Corp. (AKS) are down 9.04% to $5.68 as oil prices fall, causing U.S. producers to cut capex and rig plans, and leading to less demand for steel products the oil sector uses, notably tubular goods. 

On the New York Mercantile Exchange, West Texas Intermediate for February delivery slid 2.59% a barrel to $55.65 at 1:52 p.m. in New York. February Brent crude declined by 1.58% to $60.41.

Notably, other U.S. steel stocks are down including U.S. Steel Corp. (X) , down 8.67%, and Steel Dynamics (STLD) , down 2.83%.

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The steel industry is a major supplier to the energy industry with about 178 million tons of steel, or 12% of total finished steel production, consumed by energy industries, according to WorldSteel.

Separately, the Ohio-based steel maker said on Friday it anticipates earnings in the range of 5 cents to 10 cents in the fourth quarter, above analyst estimates of 4 cents, as the company also expects steel shipments to surge 37%. AK Steel attributed the anticipated increase to acquisitions and high demand from the automobile industry.

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 poor profit margins and generally disappointing historical performance in the stock itself."

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

  • The gross profit margin for AK STEEL HOLDING CORP is currently extremely low, coming in at 12.65%. 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 -0.45% significantly underperformed when compared to the industry average.
  • In its most recent trading session, AKS has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • 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 (-$0.16 versus -$0.34).
  • 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 77.3% when compared to the same quarter one year prior, rising from -$31.70 million to -$7.20 million.
  • Net operating cash flow has significantly increased by 58.47% to -$49.50 million when compared to the same quarter last year. In addition, AK STEEL HOLDING CORP has also vastly surpassed the industry average cash flow growth rate of -30.49%.
  • You can view the full analysis from the report here: AKS Ratings Report

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