Tuesday, April 20, 2010

AK Steel (NYSE:AKS) Iron Ore Price Warning

After a warning from AK Steel (NYSE:AKS) on the potential negative impact of iron ore prices on their second-quarter resulst, the shares quickly dropped 6 percent on the guidance.

AK Steel qualified the statement by saying they're referring to if the price of iron ore exceeds the current 30 percent iron ore price increase assumed by the company.

Much of this stems from a global iron ore price not being set at this time for 2010, and until that happens, there is no way of knowing what the earnings of the company will be for the quarter.

“While AK Steel only buys a small amount of their iron priced to global, there is a formula for the rest that is loosely based on the global price,” said Michelle Applebaum, head of a steel-research firm in Highland Park, Illinois.”

This is typical of how this earnings season is going, as investors are looking at guidance more than the numbers reported because of the terrible year last year, which in many cases can make the results appear better than they really are when contrasted with the year before.

So even though AK Steel improved from their $73.4 million loss from last year during the same quarter, posting earnings of $1.9 million or 2 cents a share, over the loss of 67 cents a share last year, investors want to know what the company sees going forward, and what they see doesn't inspire a lot of confidence at this point, although it still has to play out before we know for sure.

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