NEW YORK ( TheStreet) -- AK Steel issued its revised third-quarter guidance after the bell yesterday, prompting a drop in share price this morning.
Shares of AK Steel stock are down 5.97% as of 11:45 a.m. EST. Thus far, 6.46 million shares changed hands, surpassing its average daily volume of 5.78 million. Overall, AK Steel is lagging the S&P 500 which is down 0.29%.
According to the steel manufacturer, it expects to lose 22 to 27 cents per share in the third quarter 2013, 9 cents of which is attributed to an unexpected Middletown, Ohio furnace outage earlier in the quarter. The outage was also responsible for an estimated 5 to 6% reduction in shipments for the quarter compared with the year-ago quarter.
AK Steel is scheduled to report third-quarter results on Oct. 22, 2013.
TheStreet Ratings team rates AK Steel as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate AK Steel a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its poor profit margins and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The gross profit margin for AK Steel is currently extremely low, coming in at 8.4%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -2.87% is significantly below that of the industry average.
- AK Steel's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 32.37%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- AK Steel, with its decline in revenue, underperformed when compared the industry average of 5.2%. Since the same quarter one year prior, revenues slightly dropped by 8.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- AK Steel reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, AK Steel reported poor results of -$9.10 versus -$1.41 in the prior year. This year, the market expects an improvement in earnings (-47 cents versus -$9.10).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Metals & Mining industry. The net income increased by 94.4% when compared to the same quarter one year prior, rising from -$724.20 million to -$40.4 million.