AK Steel Holding Corp. - Bear of the Day

We are downgrading AK Steel Holding Corp. (AKS) to Underperform from our previous Neutral recommendation and lowering our target price to $12.00 from $15.00.

AK Steel recorded a third quarter net loss that was significantly wider than the Zacks Consensus Estimate. Higher input costs, particularly iron ore, is eroding margins of the company. Iron ore pricing concerns have led to a negative outlook for steel manufacturers. Revenues and average selling prices are lower, as the U.S. and global markets are in a gradual recovery.

The ongoing slowdown has marred prospects in the construction and housing sectors. AK Steel has forecasted a challenging fourth quarter of 2010 with lower shipments and prices, as well as higher costs. The company estimates operating losses of about $80 per ton. The weak third quarter results coupled with a weaker fourth quarter guidance have led to a significant downtrend in the Zacks Consensus Estimate for the current quarter and full year 2010.
 
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