Q2 could be another forgettable quarter from AK Steel

AK Steel (NASDAQ: AKS) is scheduled to report second-quarter financial results after the closing bell on July 29, Monday. Analysts expect another forgettable quarter of flat revenue growth and lower earnings, as the company continues to grapple with the weakness in the US automotive industry.

The West Chester, Ohio-based steelmaker is expected to report earnings of 5 cents per share in Q2, compared to 18 cents per share it reported during the same period last year. Revenues for this period are projected to be flat year-over-year at $1.74 billion.

Inconsistency in beating street consensus over the past years adds uncertainty to the post-earnings stock movement.

The stock is down 54% so far this year, though the stock movement has been pretty much sideways since the beginning of this year. Meanwhile, people who have stayed invested in over 5 years will feel the pinch, with the stock losing almost 73% of its value.

Over this period, AK Steel has delivered decent top-line growth and has turned profitable as well. However, headwinds surrounding the industry continues to bite its valuation.

The spike in iron ore prices could be a challenge for the company, which procures the raw material from third parties. Separately, weakness in the US automotive industry, which accounts for most of its clientele, is another dampener.

Investors will be closely following the earnings conference call for updates on the management’s strategy to tackle these headwinds.

READ: Nucor reports a drop in Q2 earnings and sales

During the last reported quarter, the company slipped to a loss from a profit a year ago, due to higher costs and expenses as well as a drop in flat-rolled steel shipments.

The stock has a 12-month average price target of $1.77, which is at a 28% downside from Thursday’s trading price.

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