A Look At AK Steel’s Position In Today’s Coal Market

A fundamental competitive advantage of AK Steel (NASDAQ:$AKS) is its immunity to short-term fluctuations in coal prices. Why? The company purchases all of its coal under annual contracts.

Similarly, U.S. Steel Corporation (NASDAQ:$X) purchases their coal under quarterly contracts in Europe. The company is incurring significant year-to-date losses.

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According to estimates by Thomson Reuters, U.S. Steel sees a one-year price target of $27.27, a 5.1% upside over its August 29 closing price. By contrast, AK Steel’s consensus price target of $8 sees a potential upside of 48.8%. Hence, Wall Street analysts are predicting a higher upside potential for Ak Steel.

Comparing Stats

  • 40% of analysts have recommended a “buy” on U.S. Steel
  • 13% of analysts have recommended a “sell” on U.S. Steel
  • 28 % of analysts have recommended a “buy” on AK Steel
  • The remaining have recommended a “hold” on AK Steel
  • Non recommended a “sell” on AK Steel

Further factors to keep in mind is AK Steel’s reliance on the automotive sector to generate revenue. US car sales have shown signs of moderation in 2017. As a result, the company might face headwinds from such stagnant sales.

For now, quarter 4 sales for AK Steel seems generally stable.

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