Barclays Capital Believes 1Q15 Guidance Reflects Volume-Driven Loss For AK Steel

In a report published Tuesday, Barclays Capital analyst Matthew J. Korn reiterated an Equal-Weight rating and $5.00 price target on

. In the report, Barclays Capital noted, "We read AK Steel's 1Q15 EPS guidance (-$0.23 to -$0.28/share) as reflecting blast furnace operators' challenge of high fixed cost absorption in a period when shipments fall. With spot steel sales weak as distributors saw high inventories and falling prices, the company's expected steel volumes of 1.73mm tons represent a 14% drop q/q. As a result, even though pricing essentially held steady – partially reflecting AK's high proportion of contract sales and its high quality product mix – we expect operating income to fall to $3/ton in 1Q15 vs. $31/ton in 4Q14 as per-ton costs increase. In this note we adjust our pricing assumptions to more conservative levels and reduce our EPS estimates for 2015/2016 substantially, noting AKS's high earnings sensitivity to realizations. We maintain our $5 price target and Equal Weight rating." AK Steel closed on Monday at $4.09.