uploads///industry _

Why Credit Suisse Double Downgraded AK Steel


May. 24 2019, Updated 8:05 a.m. ET

AK Steel

US steel stocks are having a dismal year. Steel stocks’ poor run continued on May 23. U.S. Steel Corporation (X), Cleveland-Cliffs (CLF), and Nucor (NUE) closed down 3.9%, 1.7%, and 2.8%, respectively. Steel stocks’ downward price action should be seen in the context of broader markets, which also closed in the red on May 23. Along with falling markets, downgrades from Credit Suisse hit steel stocks on May 23.

Article continues below advertisement

Credit Suisse downgraded Steel Dynamics (STLD) from “outperform” to “neutral.” The brokerage was even harsher on AK Steel (AKS). Credit Suisse double downgraded the stock from “outperform” to “underperform” and lowered its target price from $3.50 to $1. The fall represents more than 50% downside over AK Steel’s closing price on May 23. U.S. Steel Corporation has also faced a flurry of downgrades this year.


While AK Steel stock’s valuation, at least the PE ratio, could appear compelling, it has a huge debt load. As a result, the PE ratio is somewhat redundant. AK Steel’s leverage ratios are the highest among the companies that we’re discussing in this part. The company’s market capitalization is way below its debt burden. To add to AK Steel’s woes, it’s facing intense competition in its core automotive end market from companies like Nucor.

Automotive industry

AK Steel’s automotive contract pricing has disappointed markets for quite some time now. The automotive industry is set to degrow in 2019. The industry reported a yearly fall in sales for two consecutive years, which doesn’t help AK Steel. While the company managed to post better-than-expected earnings in the first quarter, there were some concerning aspects as well. Read Are AK Steel’s Q1 Earnings Worth the Celebration to learn more.


More From Market Realist

  • Steel coils at a X plant
    Basic Materials
    U.S. Steel Stock (X) Could Rise More Amid Commodity Supercycle
  • New home construction
    Basic Materials
    How Investors Can Play Surging Lumber Prices in 2021
  • MP Materials mine
    Basic Materials
    MP Materials (MP) Is an Attractive Play on Rare Earths
  • Woman looking at data
    Basic Materials
    Should You Buy SLV Stock Before Another Silver Short Squeeze?
  • CONNECT with Market Realist
  • Link to Facebook
  • Link to Twitter
  • Link to Instagram
  • Link to Email Subscribe
Market Realist Logo
Do Not Sell My Personal Information

© Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.