AK Steel Holding Corp. (NYSE: AKS) seems to be that turnaround company that never turns around. This may sound crazy, but this stock was valued at over $20 per share back in 2010, after the financial crisis. Currently it is just around 10% of that previous valuation. However things are looking up with its most recent guidance update.
The company provided guidance for its third quarter, and it expects to report a net loss in the range of $0.02 to $0.07 per share, reflecting an improvement from the net loss of $0.36 per share in the second quarter of 2015.
According to the company, it expects the positive financial effects of higher shipments, lower raw material costs, cost reduction efforts and higher operating rates will partially offset lingering low carbon steel spot market prices.
AK Steel also said it expects shipments of approximately 1.86 million tons in the third quarter, an increase of roughly 3% over the previous quarter. This increase in shipments is primarily related to increased shipments to the automotive market.
Last week, Merrill Lynch downgraded AK Steel to Neutral from Buy. Its price objective also was slashed to $4.00 from $6.00.
The Merrill Lynch call acknowledges a weaker steel price outlook, and the firm sees second-half volumes likely to disappoint. While it expects a more challenged cash flow view ahead, the firm does see that AK Steel’s free cash flow staying positive in its forecast. In short, it is a lower price and volume outlook that should bring less reward against risks from AK Steel’s leveraged balance sheet.
A few other analysts weighed in on the stock:
- Jefferies reiterated a Hold rating with a $3 price target.
- BB&T initiated coverage with a Hold rating.
Deutsche Bank reiterated a Buy rating with a $6 price target.
Shares of AK Steel were up 3.2% Friday morning, at $2.89 in its 52-week trading range of $2.38 to $10.19. The stock has a consensus analyst price target of $3.96.
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