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AK Steel’s Outlook Looks Gloomy after Earnings Miss

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Dec. 4 2020, Updated 10:43 a.m. ET

AK Steel

AK Steel (AKS) reported its third-quarter earnings on October 25 after the markets closed. The company reported revenues of $1.74 billion in the third quarter and generated an adjusted EBITDA of $160.8 million. AK Steel missed analysts’ top-line and bottom-line estimates. The stock was trading sharply lower in aftermarket trading on October 25.

In AK Steel’s pre-earnings analysis, we noted that the company’s revenue estimates look conservative given its guidance. Missing out on a conservative guidance might have spooked investors. Among other steel and iron ore companies, Nucor (NUE) and Cleveland-Cliffs (CLF) missed the consensus earnings estimates. However, Steel Dynamics’ (STLD) third-quarter earnings were better than expected.

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Second consecutive miss

The third quarter is the second consecutive quarter that AK Steel missed the consensus earnings estimates. The company’s fourth-quarter outlook also looked depressing. While the company expects its “fourth quarter flat rolled steel shipments to be essentially flat compared to the third quarter,” it expects a sequential fall in its fourth-quarter average selling prices due to less automotive shipments. The company also expects its fourth-quarter adjusted EBITDA margin to contract by 150 basis points compared to the third quarter.

What’s next?

A slowdown in automotive sales, AK Steel’s biggest end market, seems to be taking a toll on its performance. The company has touted its third-quarter results as its “best third quarter performance in 10 years.” AK Steel said that its fourth-quarter results would be “among our best fourth quarter adjusted EBITDA performances in the last 10 years.” The company might have to do some firefighting on October 26 during its earnings call that’s scheduled for 8:30 AM EST. AK Steel’s 2019 automotive contracts might be in focus. The contracts could have a major impact on the company’s earnings in 2019.

We’ll follow up with an analysis of AK Steel’s third-quarter earnings call. Read U.S. Steel Corporation: What to Expect from Its Q3 Earnings to see what analysts are projecting for U.S. Steel Corporation’s (X) third-quarter earnings.

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