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AK Steel (AKS) Q3 Earnings & Sales Lag Estimates, Rise Y/Y

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AK Steel (AKS) Q3 Earnings & Sales Lag Estimates, Rise Y/Y

AK Steel (AKS) expects strong year-over-year growth in adjusted EBITDA in the fourth quarter.

AK Steel Holding Corporation AKS reported net income of $67.2 million or 21 cents per share in the third quarter of 2018, up roughly three-fold from net income of $22.3 million or 7 cents in the prior-year quarter. Earnings per share, however, missed the Zacks Consensus Estimate of 23 cents.

Total operating costs in the quarter rose around 14% year over year to $1,620.8 million.

Net sales of $1,735.6 million in the third quarter rose around 16% year over year, but missed the Zacks Consensus Estimate of $1,821 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 third quarter were up around 4% year over year to 1,424,000 tons. Average selling price per ton for flat-rolled steel rose 9.1% to $1,114.
 
Financials
 
AK Steel exited third-quarter 2018 with cash and cash equivalents of $47.3 million compared with $69.3 million in prior-year quarter. The company had $911.8 million available under its revolving credit facility at the end of the quarter under review.

The company’s long-term debt declined by 3% year over year to $2,034.9 million.

Cash flow from operating activities was $249.9 million in the first nine months of 2018 compared with $154 million a year ago.

Guidance

The company expects market conditions to remain strong in the fourth quarter. For the quarter, AK Steel expects flat-rolled shipments to be flat compared to the third quarter. It expects average selling price to decline 2-3%. The company also expects planned outage costs to be roughly $15 million in the fourth quarter compared with $4.7 million in the previous quarter. It expects adjusted EBITDA margin to decline by around 150 basis points sequentially in the fourth quarter. Meanwhile, the company expects year-over-year growth in adjusted EBITDA in the fourth quarter.

Price Performance

Shares of AK Steel have lost 11.2% in the past six months compared with the industry’s 20.4% decline.



Zacks Rank & Stocks to Consider

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

A few better-ranked stocks in the basic materials space are CF Industries Holdings, Inc. CF, KMG Chemicals, Inc. KMG and The Mosaic Company MOS.
 
CF Industries has an expected long-term earnings growth rate of 6% and a Zacks Rank #1 (Strong Buy). The company’s shares have gained 20.9% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

KMG Chemicals has an expected long-term earnings growth rate of 28.5% and a Zacks Rank #2 (Buy). Its shares have risen 36.5% in a year’s time.

Mosaic has an expected long-term earnings growth rate of 7% and a Zacks Rank #2. The company’s shares have rallied 43.3% in the past year.

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