Analysts could be right
AK Steel (AKS) is scheduled to release its fourth-quarter earnings on January 28 after the markets close. The company would hold its earnings call the next day. The stock received a “strong buy” rating from one analyst, while five analysts rated it as a “buy” or some equivalent. Eight analysts rated AK Steel as a “hold,” while two analysts polled by Thomson Reuters on January 16 rated the stock as a “sell” or some equivalent. AK Steel’s mean consensus target price of $3.98 represents a potential upside of 48% over its closing prices on January 16. Nucor (NUE) and Steel Dynamics (STLD) are trading 23.9% and 30.7%, respectively, below their mean consensus target price.
AK Steel is expected to post revenues of $1.70 billion in the fourth quarter. The company posted revenues of $1.73 billion in the third quarter and $1.49 billion in the fourth quarter of 2017. The company’s adjusted EBITDA is expected to fall to $131 million in the fourth quarter. AK Steel posted an adjusted EBITDA of $161 million in the third quarter and $69 million in the fourth quarter of 2017.
Last year was particularly depressing for AK Steel. The stock missed its earnings estimates in the second and third quarter. To add to the earnings miss, the company’s guidance on average selling prices has spooked investors (XME).
Bullish last year
Towards the middle of 2018, some analysts turned bullish on AK Steel stock. They expect higher contract pricing in 2019. However, the company’s third-quarter earnings call dashed the bullish thesis. Several brokerages have lowered AK Steel’s target price this year. On January 8, Credit Suisse lowered AK Steel’s target price by $2 to $4.5. On January 14, Goldman Sachs also lowered AK Steel’s target price from $4 to $2.5. On January 16, Clarksons Platou Securities downgraded AK Steel from “buy” to “neutral” and cut the target price from $5.1 to $3.
Next, we’ll discuss how analysts rate U.S. Steel Corporation (X).