US Steel, AK Steel Go Their Separate Ways

Analysts tend to group steel makers into two groups–AK Steel (AKS) and US Steel (X), who are more reliant on higher steel prices, and Steel Dynamics (STLD) and Nucor (NUE), who have more flexibility in their businesses.

Bloomberg

At least that’s the way it’s supposed to work. Today’s price action, however, suggests a different grouping after all four released earnings. Steel Dynamics, which met earnings forecasts, and Nucor, which beat, have gained 1% and 0.8%, respectively, suggesting that such a pairing makes sense, at least today. But AK Steel, which reported a profit, and US Steel, which lost money for the seventh time in nine quarters, have gone in very different directions. AK Steel has gained 19%, while US Steel has dropped 1.2%.

Nomura’sCurt Woodworth and team explain why investors soured on U.S. Steel:

We view X's results as positive but disappointing in terms of guidance. Flatrolled costs showed significant sequential improvement, as costs per ton decreased about $16/ton, adjusted for maintenance spending, which drove adj. EPS to $0.27 compared to our estimate of a loss per share of -$0.25. However, management failed to provide measurable cost savings targets or
other Project Carnegie-relate initiatives, which we believe investors were anticipating…

Hot Undervalued Companies To Own In Right Now

Cowen’s Anthony Rizzuto and team were pleased with the results. They write:

AK Steel reported adjusted EPS of $0.09, above its guidance of $0.02 to $0.06, our estimate of $0.03 and the consensus estimate of $0.02. The results exceeded our forecast primarily due to higher shipments, partially offset by a lower average selling price per ton of $1,031/st compared to our $1,085/st estimate. Average selling price per ton decreased 4% sequentially due to a lower proportion of value-added product shipments to the spot market.

And the performance differential isn’t just for today. AK Steel has gained 98% during the past six months, while US Steel has risen 33%. For two similar companies, that’s very different performance.