Why AK Steel Stock Collapsed 15% Today

MarketsMotley Fool

What happened

Shares of steelmaker AK Steel Holding Corporation (NYSE: AKS) are down 13% as of 11:20 a.m. EDT, after earlier falling as much as 15.2% in response to the company reporting a modest third-quarter loss. AK Steel earned two cents per share "adjusted" for one-time items in the quarter, but Wall Street had predicted the company would earn $0.03 -- also adjusted.

Continue Reading Below

So what

That's the good news. The bad news is that, as calculated under GAAP (generally accepted accounting principles), AK Steel actually didn't earn any profit, but lost $0.02 per share. The company's quarterly revenues of $1.49 billion likewise fell slightly short of analyst estimates.

And it gets worse. Although AK's revenues fell short of estimates, the company sales actually grew 3% year over year. However, whereas one year ago AK Steel had earned $0.21 per share on less revenue, in this year's third quarter it lost money despite doing more business -- and despite enjoying higher average selling prices for its steel.

Now what

How did that happen? AK management blamed higher LIFO charges to inventory value, plus "higher raw material costs, particularly for scrap, chrome, zinc and other alloys," for not earning a profit this quarter. The good news is that analysts don't seem to think these problems will recur in Q4. To the contrary, consensus estimates call for AK to earn as much as $0.07 per share in the final quarter of this year -- and to end the year with a $0.49-per-share full-year profit.

10 stocks we like better than AK Steel HoldingWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and AK Steel Holding wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of October 9, 2017

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.