AK Steel Holding Corporation AKS announced that it purchased a group annuity contract from Massachusetts Mutual Life Insurance Company (MassMutual) for transferring roughly $615 million of pension liabilities.
The group annuity contract permanently transfers the responsibility to MassMutual for paying pension benefit obligations for roughly 4,250 retirees.
The transaction was funded completely with pension plan assets. The pension benefits for any plan participant are not expected to change due to the transaction. Moreover, the company anticipates recording a non-cash pension settlement charge of $25 million in the fourth quarter of 2019 due to the transaction.
With the group annuity contract deal, the company has transferred aggregate pension obligations of $1.1 billion to highly-rated annuity providers for around 20,000 retirees since 2016. This action reduces AK Steel’s financial risk and administrative costs, and enables it to meet pension commitments to all of its retirees.
Shares of the company have lost 17.1% in the past year compared with a 15.9% decline of the industry.
AK Steel reported net income of $2.8 million or a penny per share in the third quarter of 2019, down 96% from $67.2 million or 21 cents per share in the prior-year quarter. Its earnings per share missed the Zacks Consensus Estimate of 4 cents.
The company’s revenues were $1,535.5 million in the third quarter, down 11.5% year over year. Moreover, the top line lagged the Zacks Consensus Estimate of $1,655.1 million.
AK Steel exited the third quarter with cash and cash equivalents of $30.8 million, down 34.8% year over year. The company’s long-term debt declined 3.2% year over year to $1,969.7 million.
AK Steel trimmed its profit forecast for 2019, factoring in the change in hot-rolled carbon spot market pricing. The company now expects net income of $26-$41 million or 8-13 cents per share for the year, down from $41-$61 million or 13-20 cents per share mentioned earlier.
Moreover, adjusted EBITDA is expected between $450 million and $465 million for the year, down from $470-$490 million stated previously.
AK Steel Holding Corporation Price and Consensus
AK Steel Holding Corporation price-consensus-chart | AK Steel Holding Corporation Quote
Zacks Rank & Stocks to Consider
AK Steel currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the basic materials space include Kirkland Lake Gold Ltd. KL, Agnico Eagle Mines Limited AEM and Franco-Nevada Corporation FNV.
Kirkland Lake Gold has a projected earnings growth rate of 96.3% for the current year. The company’s shares have surged around 105% in a year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Agnico Eagle has a projected earnings growth rate of 168.6% for the current year and a Zacks Rank #2 (Buy) at present. The company’s shares have rallied roughly 66% in a year.
Franco-Nevada has an estimated earnings growth rate of 46.2% for the current year. It currently carries a Zacks Rank #2. The company’s shares have gained roughly 44% in a year.
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