KeyBanc Sounds Cautious Note On AK Steel's Q1

AK Steel Holding Corporation AKS reported what looked like a good earnings beat Monday, but KeyBanc Capital Markets warned that some extraordinary items and lukewarm guidance may mean the steelmaker isn’t as solid below the surface as the earnings may have implied.

AK Steel announced first-quarter earnings Monday of 23 cents per share vs. the Street’s expected 13 cents.

The Analyst

KeyBanc Capital Markets analyst Philip Gibbs maintained a Sector Weight rating on AK Steel. 

The Thesis

The EPS headlines may have glossed over the exclusion of 24 cents related to non-crash accruals from the wind down of the company’s Ashland Works, Gibbs said in a Monday note. (See the analyst's track record here.)

Apples-to-apples, the earnings were closer to in-line, he said. 

The company’s guidance was cool, the analyst said, warning that investors could react as early as Tuesday.

“We expect the stock to decline (Tuesday) on tepid forward guidance and limited-to-no forward free cash flow to equity." 

Price Action

AK Steel shares were up 0.81 percent at $2.48 at the time of publication Tuesday. 

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