Profitability at parts of AK Steel (NYSE: AKS) remains limited, according to Goldman Sachs, despite support from President Donald Trump's aggressive tariffs on foreign steel.
The bank downgraded shares to sell from neutral on Wednesday citing increased competition within its core automotive U.S. business
"AK Steel shares are now trading below their level from early November 2016,” according to Goldman analyst Matthew Korn, "having given back the gains made with the election of President Trump in November 2016, the initial run-up of the current cycle in domestic steel prices starting in November 2017, and the Department of Commerce announcement in February 2018 of more stringent-than-expected recommended Section 232 remedies."
Shares of the nation's major steel producers have gyrated in recent months, rising and falling on the nuances of the Trump administration's pursuit of tariffs on imports of steel. The White House's decision to push back the tariff deadline in early May, for example, sent shares of rivals U.S. Steel down 6% and Nucor down 2%.
Notwithstanding the assurance from Treasury Secretary Steve Mnuchin, AK Steel's stock price, which rallied more than 60% in the months immediately following President Trump's election, has tumbled back to their pre-election levels above $4.00
With weaker-than-expected quarterly guidance on pricing and profits, Goldman Sachs believes the stocks could sink further.
Analyst Korn cut his 12-month price forecast for the company to $4.00 from $6.00, implying 9.5% downside from Tuesday's close.
Shares dipped five cents, or 1.1%, to $4.37 early Wednesday morning.
