AK Steel (AKS -12%) plunges to its lowest level in more than a month, despite initial gains after reporting a smaller than expected Q4 loss, amid investor concerns that rising costs will constrain margins even as prices gain.
AK Steel said in today’s earnings conference call that it sees higher prices mitigating rising costs in 2018, guidance that Credit Suisse analyst Curt Woodworth says caused investors to be “pretty perplexed.”
“You’re getting pricing to cover costs, but that doesn’t mean you’re making a lot more money,” Woodworth tells Bloomberg. AKS “said they would cover raw material costs, but the point is you’re kind of running to stand still.”
Woodworth says the “rubber meets the road” in Q2 because that’s when AKS will monetize spot business and get the bulk of remaining contracts booked.
The entire sector fell, including X -5%, NUE-3%, CMC -2%, MT -2%, STLD -1%.