What: Shares of AK Steel Holding Corporation (NYSE: AKS) fell 25% in June and have dropped another 7% already in June after the company disappointed investors with second quarter guidance. Worse yet, this drop came as the company continues construction on its new research and innovation center.
So what: In mid-June AK Steel's management said that the company's second quarter loss would be $0.37 to $0.42 per share, far worse than the $0.30 loss analysts had expected. Part of the problem is a 7% decline in the average selling price of steel to $929 per ton, which wasn't completely offset by lower input costs.
This decline in sale prices and growing losses comes just as AK Steel is breaking ground on a $36 million research facility intended to create "game-changing products and processes" for the future. The problem is this long-term focus, which should be a good thing, is happening as the short-term financial picture worsens almost by the day.
Now what: AK Steel has lost money each of the last three years, and falling commodity prices don't help the company's operations. For the full year analysts are expecting an $0.87 per share loss, and it's not known yet if next year's profits will hit projections or results will disappoint once again. I just don't see enough positive news for AK Steel to buy, even after June's drop. The risk in commodities is too high right now, and competition from China won't subside anytime soon.
The article Why AK Steel Holding Corporation's Shares Dropped 25% in June originally appeared on Fool.com.
Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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