Shares of AK Steel (NYSE:AKS) touched a new 52-week high of $5.52 yesterday, before pulling back to close the day at $5.30. The steel maker has delivered a solid year-to-date return of roughly 137%. Average volume of shares traded over the last three months is roughly 13,901K.
Factors to Consider
AK Steel is witnessing continued momentum in the automotive market and higher shipment of steel products to automakers, supported by increased automotive builds. Automotive contribution to the company’s revenues was 60% last year.
Automakers are witnessing higher production and sales, which are driving the shipments of AK Steel’s stainless steel products. Strong demand for the company’s carbon and stainless steel products from its automotive customers is expected to continue in 2016. Industry experts expect light vehicle production to increase 3% in 2016 compared with 2015. This is expected to support demand for the company’s value-added products in this major market.
The acquisition of the Severstal Dearborn plant has also provided AK Steel an access to highly modernized and upgraded steelmaking equipment and facilities. With the acquisition, AK Steel expects its annual shipments to exceed 7.5 million tons. The company achieved costs synergies of around $59 million from the acquisition in 2015, exceeding its expectations.
Moreover, steel market conditions in the U.S. have improved lately, thanks to favorable rulings (leading to levy of tariffs on imports) on steel trade cases in the recent past. These punitive actions have led to a reduction in steel imports. According to the American Iron and Steel Institute ("AISI"), total steel imports for the first five months of 2016 dropped 31% from the same period a year ago. This should favorably impact U.S. steel makers including AK Steel.
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.
AK Steel currently carries a Zacks Rank #2 (Buy).
Other Stocks to Consider
Other well-placed companies in the steel space include ArcelorMittal (NYSE:MT) , Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) and Olympic Steel Inc. (NASDAQ:ZEUS) , all carrying a Zacks Rank #1 (Strong Buy).
AK STEEL HLDG (AKS): Free Stock Analysis Report
ARCELOR MITTAL (MT): Free Stock Analysis Report
SCHNITZER STEEL (SCHN): Free Stock Analysis Report
OLYMPIC STEEL (ZEUS): Free Stock Analysis Report
Original post
Zacks Investment Research