UPDATE: UBS Investment Research Downgrades AK Steel Holding Corporation on Tough Road Ahead

In a report published Tuesday, UBS Investment Research analyst Matt Murphy downgraded the rating on

from Neutral to Sell, but raised the price target from $3.00 to $3.50. In the report, UBS Investment Research noted, “AKS has integrated and mini-mill steel capacity, predominately serving the automotive sector with flat-rolled product, but also specialty electrical and stainless steel markets. The company has suffered from weak margins and high leverage, compounded by debt and high legacy liabilities. AKS is benefitting from an improving US auto sector; however, it will be some time before it can realize any benefit from its raw materials integration strategy, which is underway. The largest issue we see for AKS is the cash drag from required pension payments notwithstanding an improving economy and rising interest rates. We rate AK Steel a Sell and our $3.50 PT is based on a 6.5x EV/EBITDA (2015) multiple.” AK Steel Holding Corporation closed on Monday at $4.06.