Shares of AK Steel AKS touched a new 52-week high of $8.98 yesterday, before retracing to close the day at $8.89. The steel maker has delivered a staggering year-to-date return of roughly 297%. The stock has also gained around 72% over a month. Average volume of shares traded over the last three months is roughly 17,741K.
Factors to Consider
AK Steel’s earnings for third-quarter 2016 topped the Zacks Consensus Estimate. Sales fell year over year, but beat expectations. Better product mix, higher average selling price, improved carbon steel market prices, cost reduction measures and lower raw material costs led to a 31% year-over-year increase in adjusted EBITDA in the reported quarter.
AK Steel is well placed to gain from strength in the automotive market and higher shipment of steel products to automakers, supported by increased automotive builds. Healthy demand for the company’s carbon and stainless steel products from its automotive customers is expected to continue in the balance of 2016.
AK Steel is also laying importance on de-emphasizing commodity products and launching new products, such as its recently announced Nexmet line of next-generation advanced high strength steels.
The Nexmet family of products will provide high strength, greater ductility, and enhanced formability solutions for a variety of needs for structural and exterior automotive body lightweighting uses. These products are geared to help automotive original equipment manufacturers (OEMs) in meeting 2025 U.S. Corporate Average Fuel Economy (CAFE) targets.
Moreover, the acquisition of the Severstal Dearborn plant has provided AK Steel an access to highly modernized and upgraded steelmaking equipment and facilities. The company should gain from the synergies of the acquisition.
AK Steel also remains committed to provide competitive pricing in the current operating environment. Price increases in the spot market for various steel products have been observed of late. The company should also benefit from its cost-reduction actions.
AK Steel currently carries a Zacks Rank #2 (Buy).
Other Stocks to Consider
Other well-placed companies in the basic materials space include Ternium S.A. TX, Koppers Holdings Inc. KOP and Celanese Corporation CE.
Ternium sports a Zacks Rank #1 (Strong Buy). The company has an expected earnings growth of around 187% for the current year.
Koppers has an expected earnings growth of around 62.4% for the current year. The stock sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Celanese carries a Zacks Rank #2 and has an expected earnings growth of around 9.5% for the current year.
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