When an analyst upgrades a stock it can result in a nice pop for shareholders, and that pop can mean exponential percentage jumps especially when the stocks are trading under $10/share. In this article I wanted to focus on the August 8th upgrades of AK Steel Holding Corp. (AKS), and CTC Media Inc. (CTCM), both of which received buy ratings by their respective analysts.
AK Steel Holding Corp. - trades in a 52-week range of $4.44 (52-week low) and $10.33 (52-week high), and closed trading at $5.42/share on Tuesday as the company said it had raised prices on some of its steel products by as much as $30/ton late Monday. Analysts from CRT Capital upgraded the stock to a Buy from its previous rating of Fair Value and set a $7.00/share price target. When it comes to AKS the company has begun to turn things around a bit in the last two quarters as earnings were in-line with estimates during the March quarter and demonstrated a 100% EPS surprise during the June quarter. The fact the company increased its pricing by almost $30/ton for steel should also be considered a positive since revenues should also increase quarter over quarter due to the change.
CTC Media, Inc. - trades in a 52-week range of $7.15 (52-week low) and $17.24 (52-week high), and closed trading at $8.52/share on Tuesday as the company as the company reported earnings for the second quarter and subsequently upgraded today. The quarterly numbers beat estimates by $0.06/share or 33.33% on revenue of $187.6 million dollars which was down 11% year-over-year. Normally, I'd be concerned with the revenue number considering how much it was down, but CTCM is citing the drop in value of the Russian Ruble and if we look at the numbers in terms of Rubles, the revenue were actually up 2%. Investors should note two things when it comes to CTCM. First, the company has surpassed earnings estimates in each of the last three quarters by an average of 30.53%, which is pretty good considering U.S. based counterpart CBS Corp. (CBS) had only surpassed estimates by 13.46% over the same period. Second, the company was recently upgraded by Bank of America to a Buy from a previous rating of Neutral, and as a result the stock has performed very nicely.
I like the direction both companies are headed in terms of EPS trends and think there is substantial room to grow in each case. With that said, there is also an income angle to consider as CTCM yields 6.80% ($0.52) and AKS yields 3.80% ($0.20). Potential investors looking to establish a position in either company should do so from a conservative point of view and add to that position as both future earnings and dividend dates approach.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.