This week’s Stock of the Week stands to benefit from an increasing need for the specialty product it creates.

Steel Specialist

AK Steel Holding Corporation (AKS) will benefit from the increasing automotive use of specialty steel—its primary product.

Specialty steel, which contains special alloys, is used in motors, turbines, electrical transformers and other industrial applications. AK specialty and stainless steel are used by auto manufacturers throughout their product lines, and the company also will benefit from growing attention to infrastructure: Some of its major customers are in electrical transmission, motors and generators, pollution control and chemical processing. It also sells to the food-handling and medical and health equipment industries. Profit margins on specialty steel are improving, and AK has a number of contracts coming up for renewal—into which it can incorporate recent raw-material price increases as well as improved margins.

The company is just coming off a period of higher-than-normal maintenance costs, which were around $90 million in 2017 alone and have led to recent losses. Those costs should return to more typical levels of $45 million to $50 million this year, bringing AK back to profitability. Revenue was $5.88 billion in 2016 and will likely be $6.11 billion for 2017 but may back off slightly in 2018 to $6.02 billion if total demand for automobiles falls a bit worldwide.

Fiscal year: December. Earnings per share: 2018 est./$0.61…2017 est./–$0.37…2016/–$0.13.

Michael Underhill is chief investment officer at Capital Innovations LLC, Pewaukee, Wisconsin, which manages $116 million, and portfolio manager of the $17.6 million Oak Ridge Global Resources and Infrastructure Fund (INNNX).