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AK Steel (AKS) Beats Q4 Earnings, Misses Sales Estimates

Zacks Equity Research

AK Steel Holding Corporation AKS posted net income of $33.5 million or 11 cents per share in the fourth quarter of 2018, against a net loss of $80.4 million or 26 cents in the prior-year quarter. The company entered into a de-risking pension annuity transaction in the quarter and incurred a pension settlement charge of $14.5 million.

Barring one-time items, adjusted earnings per share came in at 16 cents. The figure beat the Zacks Consensus Estimate of 12 cents.

Net sales of $1,677.1 million in the quarter rose around 12.1% year over year, but missed the Zacks Consensus Estimate of $1,695.6 million.

Total operating costs in the quarter rose around 2.8% year over year to $1,590.6 million.

The company’s margins in the fourth quarter gained from higher steel selling prices and shipments, which more than offset higher costs for certain raw materials and supplies on a year-over-year basis.  

2018 Highlights

For 2018, the company recorded net income of $186 million or 59 cents per share, up from $103 million or 32 cents logged in 2017. Adjusted earnings improved 25% year over year to $200.5 million or 64 cents.

Net sales rose 12.1% year over year to $6,818.2 million.     

AK Steel Holding Corporation Price, Consensus and EPS Surprise


AK Steel Holding Corporation Price, Consensus and EPS Surprise | AK Steel Holding Corporation Quote


Pricing and Shipments

Flat-rolled steel shipments in the quarter were up around 3.9% year over year to 1,388,700 tons. Average selling price per ton for flat-rolled steel rose 8% to $1,106.


AK Steel exited 2018 with cash and cash equivalents of $48.6 million compared with $38 million in 2017. As of Dec 31, 2018, the company had $941.8 million available under its revolving credit facility.

The company’s long-term debt declined 5.5% year over year to $1,993.7 million.

Cash flow from operating activities was $364.7 million in the 12-months period of 2018 (ended Dec 31, 2018) compared with $198.8 million a year ago.


AK Steel stated that starting 2019, it will only issue annual guidance and no longer provide quarterly expectations.

For 2019, it expects net income in the range of $160-$180 million or 51-57 cents per share. Adjusted EBITDA is expected between $515 million and $535 million. The company expects to generate around 50% of adjusted EBITDA during the first half of 2019. Moreover, timing of scheduled outages is likely to offset the seasonal nature of business.

The company also expects capital investments of $170-$190 million for 2019.

Price Performance

Shares of AK Steel have lost 48.5% in the past year compared with the industry’s 27.7% decline.

Zacks Rank & Key Picks

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

A few better-ranked stocks in the basic materials space include Ingevity Corporation NGVT, Quaker Chemical Corporation KWR and Israel Chemicals Ltd. ICL. While Ingevity sports a Zacks Rank #1 (Strong Buy), Quaker Chemical and Israel Chemicals carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ingevity has an expected earnings growth rate of 21.5% for 2019. The company’s shares have gained 23% in the past year.

Quaker Chemical has an expected earnings growth rate of 21.1% for 2019. Its shares have moved up 27.1% in a year’s time.

Israel Chemicals has an expected earnings growth rate of 5.4% for 2019. Its shares have rallied 35.2% in a year’s time.

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