What to Look For in AKS and US Steel Earnings

Commodities & Metals

Published: July 25, 2015 7:45 am

Last Updated: April 28, 2020 9:59 am

Before markets open on Tuesday morning, AKS Steel Holding Corp. (NYSE: AKS) is scheduled to report earnings and United States Steel Corp. (NYSE: X) is set to report after markets close the same day. To say these steelmakers have had a tough year is an understatement, and over five years the damage is even greater.

Consensus estimates for AKS call for a per share loss of $0.37 on revenues of $1.71 billion compared with a per share profit of $0.02 and revenues of $1.53 billion a year ago.

U.S. Steel is expected to post a per share loss of $0.65 on revenues of $3.04 billion compared with a per share profit of $0.17 on revenues of $4.4 billion in the year-ago quarter.

On one hand the steelmakers are getting a break because iron ore prices are near 5-year lows. On the other hand, iron ore prices are very low because demand from steelmakers is low because demand for steel has been falling, especially in China. The price of steel billets according to the London Metal Exchange was $100 per metric ton in early June, down nearly 80% compared with the price a year earlier. A metric ton of iron ore has dropped in price by more than a third in the same time period.

Some recent analysts calls on AKS offer a little hope for the stock price:

Deutsche Bank has reiterated the stock as a Buy on Thursday with a price target of $6 set back in April
Macquarie reiterated both its Hold rating and its $4 price target in early July
Jefferies rates the stock a Hold with a price target of $5

Analysts are also fairly upbeat about U.S. Steel:

Deutsche Bank reiterated its Buy rating on Thursday after lowering the price target from $42 to $37 earlier this month
Barclays affirmed its Hold rating on July 9th and lowered the price target from $24 to $23
Morgan Stanley has an Overweight rating on the stock at a price target of $35

The thinking appears to be that share prices are at or near a bottom and the situation presents a buying opportunity. Given that iron ore miners had record production in the second quarter, if demand does pick up ore prices may work in the steelmakers favor.

AKS shares closed down about 4.9% on Friday at $2.53 in a 52-week range of $2.46 to $11.37. The low was posted on Friday. The consensus price target on the stock is $5.15.

U.S. Steel closed down about 4.2% at $16.25 on Friday. The stock also posted a new 52-week low of $16.18 against a 52-week high of $46.55. The consensus price target on the stock is $25.50.

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