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Analysts Are Pessimistic about AK Steel despite the Recent Slump

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AK Steel

AK Steel (AKS) has fallen 17.8% in the second quarter and is now flat for the year. U.S. Steel (X) has also pared its 2019 gains and is negative for the year.

Analysts hold a somewhat bearish view of AK Steel.

AK Steel has received “buy” ratings from only two analysts, while ten have rated it as a “hold” or some equivalent. The remaining two analysts polled by Thomson Reuters on May 20 have rated it as a “sell.” AK Steel carries a mean consensus price target of $2.76, which represents a potential upside of 22.1% over its May 20 closing price.

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Analyst action

In contrast, AK Steel had a target price of $2.86 on April 28, the day before its earnings release. After AK Steel’s first-quarter earnings release, Credit Suisse lowered its target price from $4 to $3.5, while Jefferies lowered its target price from $2.90 to $2.70. On May 8, UBS lowered AK Steel’s target price from $2.50 to $2.25. Last week, Cowen also lowered AK Steel’s target price by $0.10 to $2.50.

First-quarter earnings

AK Steel’s first-quarter earnings were better than expected. However, its earnings beat was largely due to certain one-time items. Furthermore, the company missed revenue estimates, and its shipment profile also looked weak. AK Steel is battling a slowdown in its core automotive end market. It’s lowered its 2019 earnings guidance and expects to post an adjusted EBITDA of $505 million–$525 million this year.

Earlier this year, AK Steel gave an EBITDA guidance of $515 million–$535 million for 2019. Read Are AK Steel’s Q1 Earnings Worth the Celebration? for a more detailed analysis of its first-quarter earnings results.

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