AK Steel 1Q15 Earnings Fail to Faze Investors (Part 2 of 5)
AK Steel earnings release
AK Steel (AKS), which reported its 1Q 2015 earnings on April 28, gained ~10% following the release. AK Steel earnings are often associated with huge volatility in its share price. The stock gained 5% after the company’s 4Q 2014 earnings were released, and it lost 15% after its 3Q 2014 earnings failed to please investors.
AK Steel 1Q shipments
AK Steel 1Q steel shipments were down 13% compared to 4Q 2014 shipments. However, when compared to 1Q 2014 activity, AK Steel shipments increased 38% this quarter. The previous chart shows the trend in AK Steel’s quarterly steel shipments.
Last year, AK Steel acquired Dearborn steel operations from Russia-based Severstal for a final consideration of $677 million. Effective September 16, 2014, Dearborn operations were consolidated into AK Steel earnings. The increase in steel shipments is largely attributed to shipments from Dearborn. With Dearborn in its fold, AK Steel’s production capacity has shot up by ~45%.
Having said that, it’s important to remember that in 1Q 2014, AK Steel shipments were negatively impacted by severe weather conditions in some parts of the US. ArcelorMittal (MT) and US Steel (X) also suffered production losses during that period.
Automotive shipments
AK Steel automotive shipments increased to the highest level seen in a decade. Auto shipments from Dearborn, as well as record shipments of its auto-chrome products, boosted its automotive shipments.
AK Steel derives more than half its revenue from automobile companies. Allegheny Technology (ATI) and Advance Auto Parts (AAP) are the other leading suppliers to the automotive industry. ATI currently forms 3.9% of the SPDR S&P Metals and Mining ETF (XME).
Lower shipments negatively affected AK Steel 1Q earnings. In the next part of this series, we’ll discuss what other factors affected its 1Q profits.
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