UPDATE: UBS Downgrades AK Steel (AKS) to Neutral; Questioning The Lost Volume

June 19, 2012 7:49 AM EDT
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Price: $9.71 --0%

Rating Summary:
    8 Buy, 13 Hold, 1 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 0 | Down: 0 | New: 0
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(Updated - June 19, 2012 12:36 PM EDT)

UBS downgraded AK Steel (NYSE: AKS) from Buy to Neutral. PT halved from $10 to $5.

Analyst, Shneur Z. Gershuni, said, "...guided 2Q volumes continue to underwhelm, the iron ore Joint Venture could drag operations until a pelletizing facility is added and we believe AKS is underestimating pelletizing capex. In the near-term we see pricing getting worse before it gets better and AKS has significant leverage to pricing. Guided mandatory pension contributions in 2013 were already causing significant heartburn, and 10 yr. yields falling 30bps YTD means 2014 mandatory payments could get ugly."

Gershuni is taking a more cautious view (hence the downgrade), but says shares could easily shoot back to around $8. All in, he feels that Steel Dynamics (Nasdaq: STLD) and U.S. Steel (NYSE: X) have fewer issues (balance sheet and overall structure) and are therefore better plays. UBS lowers FY12 EPS estimate from $0.67 to $0.37 and FY13 from $2.41 to $1.86.

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 $5.17 yesterday.

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