AK Steel (AKS) FCF Thesis Intact, Nomura Says

Nomura Securities analyst Curt Woodworth reiterated a Buy rating and $10 price target on AK Steel (NYSE: AKS) amid strong Q4 guidance, saying the FCF thesis is intact.

Woodworth commented, "AKS announced 4Q-14 EPS guidance of $0.05 to $0.10, in line with Nomura estimate of $0.09 but above consensus $0.04. AKS expects to ship ~2mm tons in 4Q-14, up from ~1.5mm tons in 3Q-14 (+37% q-o-q), primarily a result of the Dearborn acquisition. In response to operational challenges and unplanned outages throughout the year, AKS pulled forward planned maintenance on Ashland’s blast furnace to October. AKS is finally starting to see the benefits of sharply lower iron ore and scrap. The price of iron ore pellet is lagged roughly four months, suggesting IODEX’s $15/t decline from Mar-May to June-Sep should start to have an impact on COGS. At current spot iron ore of $70/t, we forecast the overall iron ore cost-down benefit to AKS could be as much as $175mm in 2015."

The firm adjusted FY14E EPS from ($0.30) to ($0.32) and FY15E EPS from $1.68 to $1.65.

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 $5.56 yesterday.

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