These Factors Could Affect AK Steel’s 4Q17 Profitability



AK Steel’s 4Q17 profitability

AK Steel’s (AKS) 3Q17 profits missed analysts’ estimates, and the stock fell sharply afterward. In this article, we’ll compare analysts’ estimates for AK Steel’s 4Q17 EBITDA (earnings before interest, tax, depreciation, and amortization) with the company’s guidance. We’ll also look at what could drive AK Steel’s 4Q17 profitability.

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Analysts’ estimates

AK Steel is expected to post adjusted EBITDA of $51 million in 4Q17, according to analyst estimates compiled by Thomson Reuters. In comparison, the company posted adjusted EBITDA of $69 million in 3Q17 and $151 million in 4Q16.

AK Steel commented on its 4Q17 guidance during its 3Q17 earnings call. While AK Steel did not provide any quantitative guidance, it gave broad qualitative guidance. Firstly, the company expects its shipments to fall between 3Q17 and 4Q17. Secondly, it expects its flat-rolled average selling prices to fall as well. Steel companies’ earnings are sensitive to steel prices (STLD) (CLF). Lower average steel selling prices are expected to drag down AK Steel’s 4Q17 earnings. Steel production peers U.S. Steel Corporation (X) and ArcelorMittal (MT) are also expected to feel the pinch of lower US steel prices in 4Q17.

Key drivers

Furthermore, AK Steel expects its planned maintenance costs to increase sharply, to $50 million in 4Q17 from a mere $8.5 million in 3Q17. To sum up, a combination of fewer shipments, lower steel prices, and higher costs are expected to weigh heavily on AK Steel’s 4Q17 profitability. However, 4Q17 could be just a near-term bottom for AK Steel’s earnings. To learn more, read Why 2018 Could Be Better for AK Steel. In the next article, we’ll look at key points markets might watch for in AK Steel’s 4Q17 earnings call.


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