Goldman Sachs Upgrades AK Steel Holding to Buy (AKS)

In a recent report, analysts at Goldman Sachs have upgraded AK Steel (AKS) to “buy” from “neutral.” Given the current upgrade, they are sticking with their six-month target price of $17.00, which implies 27% upside from current levels. Analysts gave two reasons for upgrading AKS, “(1) persistent declines in spot iron ore prices mean that future iron ore contract prices will come down, improving AK Steel’s margins beyond 3Q; and (2) positive earnings for 2Q2010 compared to most buy-side expectations of a loss should provide a near-term catalyst.” Goldman analysts believe that AK Steel’s current share price is not reflective of its highly profitable specialty steel segment. These analysts expect minimal near-term earnings, but remain optimistic of a strong recovery in the medium term. Goldman has reported key risks for AKS that include a drop in auto and electrical steel demand, and the possibility of increases in iron ore and coal prices. Shares of AKS are currently trading at $13.34.