Market Overview

I think you’ll love what you hear,
what you’ll see and the opportunities
that will be set before you.
- Jon Najarian

AK Steel Poised On Strategic Actions Amid Headwinds


On Oct 9, we issued an updated research report on steel producer AK Steel Holding Corporation AKS.

AK Steel delivered strong second-quarter 2017 results, reflecting continued benefits obtained through strategic initiatives implemented over the past one-and-a-half year.

AK Steel, during second-quarter 2017 earnings call, declared that it expects shipments in the third quarter to be relatively flat compared to the second as higher shipments of the carbon distributing and converting market are expected to be offset by lower automotive shipments. Average selling price in the third quarter is expected to be modestly lower than the second. The expected decline assumes a change in the mix of shipments related to an anticipated reduction in automotive shipments and decline in raw material surcharges.

Price Performance

Shares of AK Steel have declined 12.7% in the last three months, underperforming the industry's 4.8% growth.



Automotive Expansion, Cost-Cuts to Boost Growth

AK Steel is expected to benefit from strong demand in the automotive market. AK Steel remains focused on expanding its core automotive business and is laying importance on de-emphasizing commoditized products and launching new value-added products. The company is currently developing third-generation, advanced high-strength carbon steels for automotive customers that are considerably stronger than current product offerings.

The acquisition of Precision Partners is also in sync with AK Steel's commitment to broaden its portfolio of high-value products and processes and reinforces collaboration with the company's automotive market customers.

The company's sustained initiative to manage costs amid a challenging operating environment is also expected to lend support to its bottom line. AK Steel is looking for cost-saving opportunities in 2017 through a number of means including process improvement, headcount cuts, reduction in process time and procurement activities.

A Few Headwinds

However, AK Steel faces weakness in electrical steel pricing in the overseas markets due to global overcapacity. The company expects the global electrical steel market to remain volatile in the near future due to production overcapacity. AK Steel also remains exposed to margin pressure associated with elevated input costs.

Moreover, the U.S. market is still seeing high levels of imports of steel products notwithstanding a series of trade actions in the recent past. According to the American Iron and Steel Institute (AISI), total and finished steel imports increased 20.6% and 15.5% year over year, respectively, for the first eight months of 2017. AK Steel is also witnessing an increase in grain-oriented electrical steel imports into the United States, especially from China, Korea and Japan.

Eastman Chemical Company Price and Consensus


Eastman Chemical Company Price and Consensus | Eastman Chemical Company Quote


Zacks Rank & Stocks to Consider

AK Steel currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Sociedad Quimica y Minera de Chile S.A. SQM, The Chemours Company CC and FMC Corporation FMC. All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks Rank #1 stocks here.

Sociedad Quimica has an expected long-term earnings growth rate of 32.5%.

Chemours has an expected long-term earnings growth rate of 15.5%.

FMC Corporation has an expected long-term earnings growth rate of 11.3%.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation. See Them Free>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
FMC Corporation (NYSE: FMC): Free Stock Analysis Report
Chemours Company (The) (CC): Free Stock Analysis Report
Sociedad Quimica y Minera S.A. (NYSE: SQM): Free Stock Analysis Report
AK Steel Holding Corporation (NYSE: AKS): Free Stock Analysis Report
To read this article on click here.

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: contributor contributorsPreviews Trading Ideas


Related Articles (AKS)

View Comments and Join the Discussion!

Abercrombie's Estimates On The Rise: Optimism Intact

12 Biggest Mid-Day Losers For Tuesday