Should You Expect Surprises In AK Steel’s 4Q Results?
How To Play The Steel Industry Before 4Q Earnings Reports (Part 4 of 11)
AK Steel’s 4Q results
AK Steel (AKS) has one of the highest betas in the steel industry. Beta represents the volatility in a company’s share price. AK Steel’s results are generally followed by huge swings in its share price. Let’s now find out if you could run into a surprise in AK Steel’s 4Q results.
Pension costs
AK Steel has an underfunded pension plan. The Society of Actuaries issued new mortality tables in October 2014. The new tables have increased the assumed life expectancy of participants in AK Steel’s defined benefit plans. AK Steel expects its pension costs to rise sharply due to this change.
AK Steel hasn’t yet disclosed whether it will need to recognize an actuarial loss in 4Q. Earlier, AK Steel had expressed a belief that its pension costs could come down in 2015 due to new pension regulations.
Pension expenses could be a surprise in AK Steel’s 4Q results.
2015 outlook
AK Steel management should also provide its outlook for 2015. AK Steel gets more than half of its revenues from automobile companies. Vehicle sales have been strong in 2014 , and the same trend is expected to continue in 2015 as well. ArcelorMittal (MT) is a major supplier to automobile companies.
Crude oil prices have fallen sharply. You can see this in the chart above. Lower gasoline prices might shift consumers to bigger vehicles. Moreover, AK Steel doesn’t have high exposure to tubular goods , which are consumed by energy companies. U.S. Steel (X) is the biggest supplier of tubular goods in North America.
Next, let’s discuss Nucor (NUE). It’s part of the SPDR S&P Metals and mining ETF (XME). Read on to the next part of our series.
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