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AK Steel’s 1Q17 Earnings Call: What Really Spooked Investors

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Nov. 20 2020, Updated 5:17 p.m. ET

AK Steel’s 1Q17 earnings call

Previously, we analyzed key financial metrics from AK Steel’s (AKS) 1Q17 earnings call. In this part, we’ll look at key takeaways from AK Steel’s 1Q17 earnings call.

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Outlook

AK Steel expects its 2Q17 steel shipments to be flat compared to 1Q17. It said, “as increased shipments to the infrastructure and manufacturing market are offset by a marginal decline in carbon automotive shipments.” The company expects its automotive shipments to be flat year-over-year in 2017 despite an expected decline in US auto sales. The company expects to increase its market share in the auto steel market.

AK Steel expects its 2Q17 average selling prices to be “marginally higher” compared to 1Q17. However, AK Steel could witness higher costs in 2Q17 due to planned maintenance. The company expects planned maintenance costs of $23 million in 2Q17—compared to $7 million in 1Q17.

EBITDA margin

AK Steel expects its EBITDA (earnings before interest, tax, depreciation, and amortization) margin to be lower in 2Q17—compared to 1Q17. The company listed higher raw material costs, fewer automotive shipments, and costs associated with the redemption of its 2020 notes as the key drivers of its lower margin in 2Q17. In our view, flat average selling price guidance and lower margin guidance were among the key factors that spooked investors despite AK Steel’s 1Q17 earnings beat.

While the 1Q17 earnings season started positive with Nucor (NUE) and Steel Dynamics (STLD), its seems to be ending on a somber note with AK Steel and U.S. Steel Corporation (X).

In our upcoming series, we’ll look at U.S. Steel’s 1Q17 earnings. Read Earnings, Patriotism, and China: Good News for US Steelmakers to explore how President Trump’s order on steel imports could impact steelmakers (MT).

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