Think Again Before Buying AK Steel (AKS)

November 19, 2012 1:51 PM EST Send to a Friend
Get Alerts AKS Hot Sheet
Price: $5.52 +5.34%

Rating Summary:
    8 Buy, 10 Hold, 2 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 30 | Down: 23 | New: 30
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Last week AK Steel (NYSE: AKS) announced a concurrent bond and stock offerings with the proceeds being used to repay borrowings under its asset-backed revolving credit facility and for "general corporate purposes".

Commenting on the developments, analyst Luke Folta of Jefferies wrote "Our lack of enthusiasm for AKS shares continues. Though the risk of near term bankruptcy has been reduced following its capital raise, (a) continued cost disadvantages relative to peers, (b) challenging conditions in each of its carbon, stainless and electrical steel markets and (c) risks associated with its greenfield projects makes investment in AKS a still risky proposition."

"Amidst continued challenging mkt. conditions, AKS has still to execute what we see as relatively risky [raw material] expansion projects to reduce its cost disadvantage relative to peers," noted Folta.

Overall, Jefferies has a cautious view on global steel fundamentals, and Folta thinks investors should remain defensive. For those who want to play in the space, he thinks NuCor (NYSE: NUE) and United States Steel (NYSE: X) are preferable to AKS.

Jefferies has a Hold rating on AKS with modified price target of $3.50 (from $5.00).

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 $3.57 yesterday.


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