AK Steel holding Corporation (NYSE: AKS) – Q1 FY 2011 Earnings Preview
Wednesday, April 20, 2011 1:00 PM

AK Steel Holding Corp. (NYSE: AKS) is expected to report its first quarter FY 2011 earnings on April 26, 2011. In the last four quarters, AK Steel reported EPS exceeded analysts' consensus estimates for quarters ended June 2010 and December 2010 by margins of 242.90 percent and 22.20 percent, respectively. For the quarter ended March 2010, the reported EPS met analysts' consensus, while for the quarter ended September 2010, the reported EPS missed analysts' consensus estimate by a margin of 58.80 percent.

AK Steel Holding is a fully-integrated producer of flat-rolled carbon, stainless and electrical steels and tubular products through its wholly-owned subsidiary, AK Steel Corp. The Company's operations consist of seven steelmaking and finishing plants located in Indiana, Kentucky, Ohio and Pennsylvania that produce flat-rolled carbon steels, including premium-quality coated, cold-rolled and hot-rolled products, and specialty stainless and electrical steels that are sold in hot band, and sheet and strip form.  In addition, the company's operations include European trading companies that buy and sell steel and steel products and other materials.

In the last quarter ended December 31, 2010, AK Steel reported a net loss of $98.3 million, or $0.89 per diluted share of common stock, compared with net income of $39.8 million, or $0.36 per diluted share, for the fourth quarter of 2009. AK Steel reported an operating loss for the fourth quarter of 2010 of $154.6 million, or $114 per ton, compared with an operating profit of $87.0 million, or $64 per ton, for the fourth quarter of 2009. Net sales for the quarter were $1,390.6 million on shipments of 1,359,900 tons compared with sales of $1,319.9 million on shipments of 1,368,300 tons for the year-ago same quarter. In fiscal 2010, AK Steel reported a net loss of $128.9 million, or $1.17 per diluted share of common stock, compared with a net loss of $74.6 million, or $0.68 per diluted share, in 2009. Sales for the full year were $5.968.3 billion compared wit. $4,077 billion for the full year of 2009.

AK Steel in its regular update expects shipments for the first quarter FY 2011 to be 1,450,000 tons, up 7 percent compared with the shipments in the first quarter of FY 2010. AK Steel expects its first-quarter 2011 average per-ton selling prices to increase approximately 8 percent compared with the fourth quarter 2010 level. The expected increase in the average selling price is due to anticipated higher contract and spot market prices and an improved product mix.

In the steel and iron industry, AK Steel competes with companies such as Nucor Corp. (NYSE: NUE) and Steel Dynamics Inc. (Nasdaq: STLD). In the trailing 12 months, Nucor has reported an EPS of $0.42 per share on revenues of $15.84 billion, with quarterly revenue growth of 31.20 percent. Steel dynamics reported earnings of $0.64 per share on revenues of $6.30 billion, with quarterly revenue growth of 29.50 percent. On the other hand, AK Steel reported a loss of $1.17 per share on revenues of $5.97 billion, with a quarterly revenue growth of 5.40 percent.

AK steel has a total market capitalization of $1.68 billion. In comparison to the industry, AK Steel has had losses over the past year and does not have a P/E ratio. However, the industry's average P/E ratio is 10.48. The P/S sales ratio is at 0.28, compared with an industry average of 0.66. The P/B ratio of the company is at 2.69, compared to the industry's P/B ratio of 3.35. Net profit margin of AK Steel is negative 7.07 percent, lower than industry's average net profit margin of 6.60 percent. The return on equity (ROE) of the company is negative 17.18 percent, compared with an industry ROE of 7.80 percent.

On January 25, 2011, AK Steel's board of directors declared a quarterly cash dividend of $0.05 per share of common stock, payable on March 10, 2011 to shareholders of record on February 11, 2011. The company from time to time makes stock repurchase in accordance with the company's $150.0 share repurchase program, although no shares were repurchased in 2010 under this program.

For the first quarter, analysts' EPS estimates range from a low of negative ($0.06) to positive $0.11 per share, compared with consensus estimate of negative ($0.02) per share or $0.25 per share in the year ago quarter. For this quarter, analysts' revenue estimates range from a low of $1.60 billion to a high of $1.41 billion, compared with a consensus estimate of $1.61 billion, or $1.41 billion, in the same quarter a year ago. For the quarter ended March, 2011, the consensus EPS forecast has been increased from negative ($0.05) per share estimated 60 days ago to the current estimate of negative ($0.02) per share. In the last 52 weeks, AKS has been trading in the range of $11.34 to $23.20. The last trading price of the stock was $15.20 on April 13.. During the first quarter, JP Morgan's analysts upgraded AK Steel's stock rating to overweight from neutral with a price target of $22.



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