Credit Suisse Reinstates AK Steel (AKS) at Underperform

Credit Suisse reinstated coverage on AK Steel (NYSE: AKS) with an Underperform rating and a price target of $9.00.

Analyst Nathan Littlewood said, "The Bull Story is about a US/ROW decoupling, and logistical constraints making the import parity pricing argument less relevant than in the past. Exposure to electrical and stainless steel markets is also favorable. Investments in raw material projects wind down in 2015, and recent relief on pensions and OPEB contributions place the company at the verge of a new high free cash flow era. In our view, however, much of this is already priced into the stock. The Bear Story is about significant leverage to the automotive industry – a market threatened not only by other materials but also by demographics, and street expectations around Magnetation/Iron Ore cash flows which we believe are likely to be underwhelmed."

"AKS and X both have leverage to our constructive macro view, but where we see X's 'self-help' story as having more positive news to deliver, we see AKS's self-help story (raw materials) as having less scope for upside surprise. The other obvious contrast is that one company is looking at shutting down BF steelmaking capacity in North America, while the other is buying more of it," he added.

For an analyst ratings summary and ratings history on AK Steel click here. For more ratings news on AK Steel click here.

Shares of AK Steel closed at $10.26 yesterday.

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