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Earnings Preview: Analyzing AK Steel’s 2Q17 Revenues

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AK Steel’s 2Q17 revenues

AK Steel (AKS) will release its 2Q17 earnings on July 25. In this part, we’ll see what analysts forecast for the company’s 2Q17 revenues. Notably, steel companies’ revenues depend on external shipments and average selling prices. Prices vary across steel companies depending on the product portfolio. AK Steel’s average selling prices are usually higher—compared to companies like U.S. Steel Corporation (X), ArcelorMittal (MT), and Nucor (NUE)—due to its high value add product portfolio.

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Consensus estimates

AK Steel is expected to post revenues of $1.55 billion in 2Q17, according to consensus estimates compiled by Thomson Reuters. In contrast, it posted revenues of $1.53 billion in 1Q17 and $1.49 billion in 1Q17. Wall Street analysts expect AK Steel’s revenues to rise on a yearly and sequential basis.

During its 1Q17 earnings call, AK Steel noted that its 2Q17 average selling prices could be slightly higher compared to 1Q17. However, we saw a deterioration in steel prices after AK Steel’s 1Q17 earnings call. Although steel prices recovered in June, it might not be reflected in steelmakers’ 2Q17 earnings due to the lag impact on spot sales. AK Steel sells most of its steel to contract customers. High contract exposure somewhat insulates AK Steel from volatility in spot steel prices (STLD).

Shipments

During its 1Q17 earning call, AK Steel said that the company expects its 2Q17 steel shipments to be flat compared to 1Q17 because “increased shipments to the infrastructure and manufacturing market are offset by a marginal decline in carbon automotive shipments.” Along with revenues, it’s also important to look at profitability metrics.

In the next part, we’ll see what analysts project for the company’s 2Q17 profitability.

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