AK Steel Holding Corporation (AKS) is scheduled to report their results after the markets closes on April 19, 2010. AKS reported a sizable Q4 beat on higher than expected volumes and operating margins. Q1 operating profit guidance of $35/t is roughly in line with consensus EPS estimates of $0.24. However, there are concerns in the markets that Q1 profits would surprise to the downside as contract pricing resets lower, particularly for electrical steel, and as the 2009 LIFO tailwind becomes a headwind.
AK Steel produces flat-rolled carbon, stainless and electrical steel products, as well as carbon and stainless tubular steel products, for automotive, appliance, construction and manufacturing markets. AK Steel maintains a relentless pursuit of improvement in every critical performance measure. The result is a track record without equal.
AK Steel reported Q4 EPS of $0.36, above the Street estimate of $0.20. The $0.36 result includes a one-time tax charge of $5.1m. Operating profit was $65/t, well above management's guidance of $30/t - $35/t, which is likely a result of a larger than expected LIFO credit. Management guided to continued strength in Q1 shipments and 4% - 5% improvement in average selling prices. Net sales in Q4 were $1.31 billion, compared to $1.45 billion in the same quarter of last year. The firm experienced an operating profit of $87 million, or $64 per ton, compared to an operating loss of $689.2 million, or $642 per ton, for the Q4 2008, which included the pre-tax, non-cash charges previously mentioned. For the full-year 2009, AK Steel reported a net loss of $74.6 million, compared to net income of $4 million in 2008. Net sales for 2009 fell to $4.07 billion from sales of $7.64 billion in 2008. The company posted a 2009 operating loss of $70.1 million, or $18 per ton, compared to a 2008 operating profit of $28 million, or $5 per ton.
Analysts' estimates for Q1 2010 range from a low of $0.21 to a high of $0.30, compared to a consensus estimate of $0.24, with number of estimates being 11 and the co-efficient variance 12.79. On January 25, 2010 AK Steel announced that its board of directors declared a quarterly cash dividend of $0.05 per share of common stock, payable on March 10, 2010 to shareholders of record on February 12, 2010. On March 23, 2010, the company announced that it will record a non-cash charge of approximately $31 million in Q1 2010 resulting from the recently-enacted Patient Protection and Affordable Care Act (the "Act") due to a reduction in the value of the company's deferred tax asset as a result of a change to the tax treatment of Medicare Part D reimbursements.
The stock closed at $24.20, up 3.31% on April 6, 2010. With Q4 2009 results coming in above expectations and AK Steel having the highest exposure to auto steel, and demand for the same expected to remain steady, analysts recommend a strong hold and foresee improved earnings this quarter.
