Shares of AK Steel Holding Corporation (AKS) reached a new 52-week high of $9.89 on Aug 11, exceeding its previous high of $9.67. The stock pulled back a bit to end the trading session at $9.83 on that day.
The steel maker, which has a market cap of around $1.3 billion, has seen its shares catapult roughly 175% over a year versus around 17% gain for the S&P 500 for the same period. Average volume of shares traded over the last three months is around 6,174.5K.
What’s Driving AKS Up?
Shares of AK Steel are heading higher following its forecast-topping second-quarter 2014 results, reported on Jul 29. Both revenues and adjusted earnings for the quarter topped Zacks Consensus Estimates. The company saw higher sales in the quarter on increased shipments. It expects improved results on a sequential basis in the third quarter.
AK Steel, a Zacks Rank #3 (Hold) stock, is benefiting from strength in the automotive market and higher shipment of steel products to automakers. The company gets more than half of its revenues from this market which continues to show strong momentum.
AK Steel expected to continue to gain automotive market share in 2014, driven by continued solid demand for its carbon and stainless steel products from its automotive customers.
AK Steel is also investing to procure about half of its iron ore and coal requirements internally. It is making good progress with its first coal mine at AK Coal and is ramping up mining volumes. AK Steel is also making significant progress with its iron ore pellet project at Magnetation. Both these strategic investments are expected to improve the company’s cost structure and strengthen its position in the years ahead.
AK Steel, last month, agreed to buy Severstal North America's integrated steelmaking assets for $700 million in cash. The acquisition, which will also include a cokemaking facility and interests in three joint ventures that process flat-rolled steel products, will be beneficial to AK Steel in a number of ways. The company will get access to highly modernized and upgraded steelmaking equipment and facilities and will also be able to attain cost synergies by saving purchase, transportation and overhead costs.
AK Steel should also benefit from the favorable pricing trend for key raw materials such as iron ore, coke and coal. Its results in the third quarter are expected to benefit from lower iron ore costs.
Other Stocks to Consider
Some other stocks worth considering in the steel space include Grupo Simec S.A.B. de C.V. (SIM), United States Steel Corp. (X) and ThyssenKrupp AG (TYEKF). While Grupo Simec retains a Zacks Rank #1 (Strong Buy), both United States Steel and ThyssenKrupp hold a Zacks Rank #2 (Buy).
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