What: Shares of AK Steel Holding Corporation jumped as much as 12% today after it reported third-quarter earnings.
So what: Third-quarter sales rose 7.5% to $1.71 billion as shipments rose 28% to 1,871,200 tons. The surprise was that AK Steel swung from a loss of $7.2 million a year ago to a profit of $6.7 million, or $0.04 per share. That beat Wall Street's expectation of a $0.06-per-share loss and may show a sliver of hope for profits going forward.
Now what: Steel prices have been under pressure all year, so it's impressive that AK Steel could squeak out a profit, no matter how small it was. Lower raw material costs helped, but cost reductions within the business and higher volumes contributed to the financial success as well.
Long term, to maintain profitability, shareholders should look for higher steel prices as a driver of results. If the claims of illegal imports persist, there won't be much upside for prices, and a drop in today's demand could result in losses once again. With that in mind, I'd like to see more solid financial footing before jumping into this commodity business, but this was a solid quarter for AK Steel nonetheless.
The article Why AK Steel Holding Corporation's Shares Popped Today 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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