AK Steel Corp. (AKS) reported first-quarter 2010 results. The company swung to a net income of $1.9 million from a net loss of $73.4 million in the year-ago quarter. Excluding special items, adjusted earnings per share came in at 25 cents, which matched the Zacks Consensus Estimate, derived from 14 covering analysts.
Revenues during the reported quarter surged by 52.4% to $1,405.7 million from $922.2 million in the year-ago period. The growth was primarily attributable to a robust 77.9% increase in shipments to 1.4 million tons, compared to 779,000 tons in the prior-year quarter.
Higher shipments reflect an improvement in the year-over-year demand for steel. However, average selling prices declined 14.4% to $1,014 per ton from $1,184 per ton in the year-ago quarter as the U.S. and global markets continue with a gradual recovery. Operating profit for the quarter came in at $57.6 million, or $42 per ton, compared to an operating loss of $99.9 million or $128 per ton for the first quarter of 2009.
At quarter end, AK Steel had cash and cash equivalents of $330.2 million and long-term debt of $605.7 million, compared to $462.0 million of cash and $609.4 million of long-term debt in the year-ago period. During the quarter, the company deployed $14.9 million of cash towards capital expenditure, $7.5 million towards share buyback and $5.0 million towards dividend payments.
Outlook and Zacks Consensus
AK Steel expects shipments of approximately 1.45 million tons during the second quarter of 2010, which indicates a growth of 5% over the first quarter. Average selling prices are expected to rise about 5% to 6% over the previous quarter levels. The company also anticipates planned maintenance outage costs to be approximately $15 million higher for the second quarter, compared to that recorded in the first quarter.
AK Steel also stated that there exists significant uncertainty regarding global iron ore pricing for 2010. Moreover, the company expects a more than 30% increase (over the first quarter) in iron-ore pricing to adversely affect results during the second quarter of 2010.
Meanwhile, the Zacks Consensus Estimate on AK Steel’s earnings for the second quarter has moved up by 2 cents in just the past week to 37 cents per share as 2 of 11 covering analysts raised expectations, while 1 moved in the opposite direction. However, for entire 2010, the Zacks Consensus Estimate has reduced by a penny over the past month, as 2 of 14 covering analysts lowered projections with 1 moving in the opposite direction.
We currently have a Neutral recommendation on the stock.
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