AK Steel (AKS) is the worst-performing steel stock among the steel companies that we’re covering in this series. The stock has lost 45.4% year-to-date based on its closing price on December 4. U.S. Steel Corporation (X) and ArcelorMittal (MT) have lost 35.8% and 29.3% during the same period. Cleveland-Cliffs (CLF) has outperformed US steel producers by a wide margin in 2018.
Among the analysts polled by Thomas Reuters on December 5, one analyst recommended a “strong buy” for AK Steel, six recommended a “buy,” six recommended a “hold,” and two recommended a “hold.” AK Steel’s mean consensus target price of $4.83 represents a 56.3% upside over its closing price on December 4.
In November, Morgan Stanley lowered AK Steel’s target price from $5.5 to $5. AK Steel has witnessed several downgrades in 2018 especially after its earnings release. The company missed the earnings estimates for the last two quarters. To make things worse, management’s commentary on the average selling price outlook didn’t impress investors.
From a medium to long-term perspective, AK Steel’s core automotive end market faces several challenges. While US auto sales have stagnated, several companies including Steel Dynamics (STLD) are adding capacity that could also serve automotive customers. With a 2019 PE multiple of 3.96x, AK Steel looks to offer a decent opportunity despite the known headwinds.
Next, we’ll discuss analysts’ expectations for ArcelorMittal (MT).