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AK Steel posted a higher net income in the second quarter than the first quarter, but the stock price still suffered a more than 17 percent drop on the day of its earnings release.
AK Steel reported net income July 26 of $33.1 million, an approximately 24 percent increase from net income during last year’s second quarter, $26.7 million. AK Steel reported its best quarterly net income since the end of 2009. But instead of a lift in the stock price on the news a week ago, its stock price fell from $15.52 to $12.81 a share and hasn’t reached above $13 ever since.
AK Steel doesn’t comment on its stock price, according to Alan McCoy, AK Steel spokesman.
“Typically with lower stock prices, the most direct effect you have is it raises the cost of raising new capital,” said Steve Wyatt, chairman of finance at Miami University. “The other direct effect is stockholders are the owners of the company. They have indirect control through the board of directors.”
The board of directors will want an explanation, Wyatt said.
The stock dropped because the West Chester Twp.-based steelmaker missed expectations. In a conference call July 26 about earnings, James Wainscott, chairman, president and chief executive officer, said AK Steel fell short of its own expectations and guidance for the second quarter.
The majority of the shortfall was due to higher-than-expected iron ore pellet prices, Wainscott said.
Even though AK Steel started this year with a new way to price iron ore — it has agreements to set prices quarterly with its three suppliers and the price is tied to an index of iron ore prices — the index hasn’t fallen as much as the company anticipated, Wainscott said.
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