Zacks Industry Rank Analysis Highlights: AK Steel, Con-Way, Steel Dynamics, U.S. Steel and YRC Worldwide

Business Wire, April 3, 2008

CHICAGO -- Zacks.com releases the latest Zacks Industry Rank. Stocks featured in this week's analysis includes AK Steel (NYSE: AKS), Con-Way (NYSE: CNW), Steel Dynamics (Nasdaq: STLD), U.S. Steel (NYSE: X) and YRC Worldwide (Nasdaq: YRCW). To see the Zacks Industry Rank and the trend in earnings estimates revisions for more than 200 industry groups, visit http://at.zacks.com/?id=3154.

Zacks Industry Rank Analysis is written by Charles Rotblut, CFA, Senior Market Analyst for Zacks.com.

Despite the credit crunch, housing slump and ongoing economic weakness, steel companies are enjoying pricing power. AK Steel (NYSE: AKS) recently announced price increases for both stainless and carbon steel products and Steel Dynamics (Nasdaq: STLD) cited widened margins as the reason for its improved first-quarter EPS guidance.

How is this possible?

The bubble in commodity prices has customers expecting price increases. The far bigger reason, however, is supply. Inventories, which have been volatile, are low. Less supply means higher prices.

Global economic growth has kept demand for steel relatively good, while consolidation within the industry has kept capacity from being greatly expanded. Within the U.S., higher freight costs and the weaker dollar have made imported steel less competitive.

Steel producers are taking advantage of the situation to push through price increases, while keeping an eye on controlling costs where they can. Higher raw material costs are a concern, but so far, steel producers have been able to pass along those costs.

Not surprisingly, brokerage analysts have recently raised their forecasts on multiple companies within Steel-Producers. Just within the past 30 days, four or more brokerage analysts have upwardly adjusted their projections on several steel producers including AKS, STLD and U.S. Steel (NYSE: X).

STLD and X are Zacks #1 Rank ("strong buy") stocks. AKS is a Zacks #2 Rank ("buy") stock.

Moving on...

One industry group lacking pricing power is Transportation-Trucking. The economic slump, competition from rail for long-haul freight and too many trucks has resulted in price competition within the industry. Spot prices remain weak and are expected to remain so for the foreseeable future.

Adding to the pressures are rising fuel costs. Like gasoline, the cost of diesel has risen significantly and now averages about $4 per gallon.

On Tuesday, independent truck drivers went on strike to protest diesel fuel prices. News reports place the cost of filling up a rig in excess of $1,000. Since independent drivers cannot pass along the higher costs, they are seeing their salaries being cut. As a result, many of them want the Bush administration to act. The strike is expected to last throughout the week, though it is unclear how many drivers are actually participating.

Although the large trucking companies are better equipped to handle higher diesel prices, their profit margins are still taking a hit. This is why brokerage analysts continue to express pessimism about the outlook for these companies.

During the past 30 days, four or more brokerage analysts have lowered their full-year earnings estimates on Con-Way (NYSE: CNW) and YRC Worldwide (Nasdaq: YRCW).

YRCW is a Zacks #5 Rank ("strong sell") stock and CNW is a Zacks #4 Rank ("sell") stock.

The interactive Zacks Industry Rank List allows you to see all of the companies, and their Zacks Rank, within more than 200 industries. See the list at http://at.zacks.com/?id=3208.

About Zacks Industry Rank and the Zacks Rank

Zacks Industry Rank is calculated by averaging the Zacks Rank for all covered companies within a given industry. The Zacks Rank is assigned to approximately 4400 stocks and ranges from #1 ("Strong Buy") to #5 ("Strong Sell"). Both the Zacks Industry Rank and the Zacks Rank are quantitative indicators designed to cover periods of 1-3 months.

Since 1988, the Zacks Rank has proven that "Earnings estimate revisions are the most powerful force impacting stock prices." Since inception in 1988, #1 Rank stocks have generated an average annual return of +32%. During the 2000-2002 bear market, Zacks #1 Rank stocks gained +43.8%, while the S&P 500 tumbled -37.6%. Also note that the Zacks Rank system has just as many Strong Sell recommendations (Rank #5) as Strong Buy recommendations (Rank #1). Since 1988, Zacks Rank #5 stocks have underperformed the S&P 500 by 129% annually (+5 % vs. +12%). Thus, the Zacks Rank system allows investors to truly manage portfolio trading effectively.

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