AK Steel’s 2018 guidance
AK Steel (AKS) provides qualitative guidance during its quarterly earnings call. U.S. Steel Corporation (X) and Cleveland-Cliffs (CLF) provide their annual EBITDA (earnings before interest, tax, depreciation, and amortization) guidance during their earnings calls. Steel Dynamics and Nucor generally provide their quantitative earnings guidance two weeks before the quarter ends. In 3Q17, AK Steel’s guidance spooked markets. The lower-than-expected guidance and earnings miss resulted in a 23% slide in AK Steel’s stock price after its 3Q17 earnings release. In this part, we’ll see what AK Steel had to say about its 2018 guidance during the 4Q17 earnings call.
Kirk W. Reich, AK Steel’s COO, said, “In carbon automotive for 2018, we currently expect to ship overall volumes very similar to that of 2017 but with an improved product mix” On the pricing side, Reich noted that “in the auto contracts, some of which are completed for 2018 and some of which expire at various points throughout the year, we have been able to secure price increases which will cover our anticipated cost increases.” AK Steel sees “slightly improved margins” in its automotive business as a result of higher average selling prices and an improved product mix.
However, the markets were probably looking for something more than “slightly improved margins” from AK Steel. Markets’ expectations could have been among the reasons why AK Steel tanked after its 4Q17 earnings release. While U.S. Steel Corporation (X), Nucor (NUE), and ArcelorMittal (MT) also saw negative price action after their 4Q17 earnings release, they didn’t see the selling spree that AK Steel witnessed.
While AK Steel’s 2018 guidance was lower than what the markets were expecting, its 1Q18 guidance annoyed some analysts. We’ll discuss AK Steel’s 1Q18 guidance in the next part.