Underlying Investment ThesisAccording to Folta, underlying steel demand will see improvements from key markets such as auto, white goods and general manufacturing. The analyst estimates that overall steel shipments are expected to improve three percent year over year in 2016 while EBITDA per ton will increase from $79 per ton in 2015 to $81 per ton in 2016. Under these assumptions, AK Steel will earn $0.72 per share in 2016; EBITDA of $668 million. Price Target: $4.75.
Upside ScenarioUpside scenarios include actual steel shipments rising four percent in 2016 and EBITDA per ton improves to $91 per ton. Under this case, the company is likely to earn $1.03 per share in 2016; EBITDA of $755 million. Price Target: $7.25.
Downside ScenarioDownside scenarios include actual steel shipments rising only two percent in 2016 while average selling price/metal spreads fall short by $5 per ton.
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