AK Steel Slashed to Sell Amid Trade Worries
Shares of AK Steel Holding Corp. (AKS) had a significant bump after President Donald Trump’s victory in 2016, but they have fluctuated violently since then, with the general trend being negative, extremely negative. According to CNBC, Goldman Sachs’ Matthew Korn dropped his price objective for the steelmaker and downgraded its shares from neutral to sell, citing the steelmaker’s limited profitability prospects even as the Trump administration pushes for “strong tariffs on imported steel.”
According to The Wall Street Journal, the United States is threatening to slap tariffs on European steel, which American steelmakers favor despite opponents warning that it might provoke costly trade retaliation from Europe.
Steel Stock Swings
Korn’s new price objective has been reduced from $6 to $4, which is lower than the price at which the company’s shares were trading in early November 2016, just before to Trump’s election victory. Following the election, their shares rose by up to 80% in the following six weeks before falling steadily ever since. As of 11 a.m. EST, AK Steel’s stock was trading at $4.64, down 18% year to date due to gyrations, and with another almost 14% decline in store if Korn’s projection is true.
The recent gyrations in AK Steel’s shares have mirrored those seen in other steel makers, as the market interprets the intricacies in trade discussions, notably those affecting steel import duties. The White House’s decision to delay the tariff deadline in early May, for example, sent other steel companies, such as United States Steel Corp. (X) and Nucor Corp. (NUE), plummeting. (See also: Trade Uncertainty Is Already Hurting US Businesses.)
‘Weaker than Expected’
While Treasury Secretary Steven Mnuchin told investors last week that steel and aluminum tariffs on China “would be implemented,” AK Steel is dealing with its own set of internal issues that are impacting on its stock price. According to CNBC, Korn contends that the steelmaker’s quarterly guidance on pricing and earnings was worse than anticipated, noting, “with our revised estimates reflecting lower projections for actual pricing and profitability, the risk/reward for AK Steel seems negative.”
Despite AK Steel’s gloomy outlook, Korn maintains a buy recommendation on Nucor, Steel Dynamics Inc. (STLD), and Stelco Holdings Inc. (STLC), claiming that these businesses “provide a clearer path toward growth and enhanced profitability,” according to Barron’s. (See also: Have Metals Stocks Peaked?)
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