UBS (NYSE:UBS) sees Thyssen's new mill as an overall drag on AK Steel (NYSE:AKS), which will hurt their more profitable businesses. Consequently, UBS said they're maintaining a "Neutral" rating on the company.
"We cut our Q4e EPS to a $0.64 loss to incorporate guidance of an $80/t EBIT loss on 10% fewer tons, and no planned repeat of a Q3 $8M+ FX gain. Seasonally weak Q4 volumes distort profits somewhat, but we see still challenging conditions into 2011. As such, we cut our 2011e to $0.30 from $0.42 and vs consensus $1.08," said UBS.
"AK is our least favorite pick...We have longer-term structural concerns over
pressure from Thyssen’s new mill, from both its high quality focus in AK’s auto niche business and just-started stainless steel capacity that can hurt AK's higher-profit businesses."
AK closed Wednesday at $12.40, losing $0.44, or 3.43 percent. UBS has a price target of $13 on them, lowering them from $14.
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