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AK Steel's (AKS) Q2 Earnings Beat, Sales Miss Estimates

Zacks Equity Research

AK Steel Holding Corporation AKS reported net income of $66.8 million or 21 cents per share in the second quarter of 2019, up 18% from $56.6 million or 18 cents in the prior-year quarter. Earnings per share topped the Zacks Consensus Estimate of 6 cents.

Net sales of $1,680.5 million in the quarter fell around 3.8% year over year and missed the Zacks Consensus Estimate of $1,769.2 million.

Per the company, the downside was mainly caused by reduced shipments to the automotive market along with lower spot market selling prices. These were partly offset by higher selling prices to the automotive market.

AK Steel Holding Corporation Price, Consensus and EPS Surprise

 

AK Steel Holding Corporation Price, Consensus and EPS Surprise

AK Steel Holding Corporation price-consensus-eps-surprise-chart | AK Steel Holding Corporation Quote

 

Pricing and Shipments

Flat-rolled steel shipments in the quarter were down around 3.4% year over year to 1,391,400 tons. Average selling price per ton for flat-rolled steel was $1,102 compared with $1,101 in the year-ago quarter.

Financials

AK Steel exited the quarter with cash and cash equivalents of $42.2 million, down 8.3% year over year. The company’s long-term debt declined around 4.4% year over year to $1,946.2 million.

Cash flows from operating activities was $136.2 million for the first half, down 27.3% year over year.

Guidance

AK Steel trimmed its profit forecast for 2019 factoring in the change in hot-rolled carbon spot market pricing. The company sees net income in the range of $41-$61 million or 13-20 cents per share for the full year, down from its previous view of $76-$96 million or 24-30 cents per share.

Adjusted net income for 2019 is projected in the range of $118-$138 million or 37-44 cents per share, down from previous expectation of $153-$173 million or 48-54 cents per share.

Adjusted EBITDA is expected between $470 million and $490 million, down from the company’s prior view of $505-$525 million.

AK Steel continues to expect planned maintenance outage expenses in the band of $70-$80 million for 2019, with a significant portion likely to be incurred in the fourth quarter.

Price Performance

Shares of AK Steel have gained 12.8% year to date against the industry’s 1.1% decline.



Zacks Rank & Key Picks

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

Some better-ranked stocks in the basic materials space are SSR Mining Inc. SSRM, Kinross Gold Corporation KGC and Arconic Inc. ARNC, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

SSR Mining has an expected earnings growth rate of 134.8% for 2019. The company’s shares have surged 56% in the past year.

Kinross has projected earnings growth rate of 100% for the current year. The company’s shares have gained 18.3% in a year’s time.

Arconic has an estimated earnings growth rate of 38.2% for the current year. Its shares have moved up 16% in the past year.

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