AK Steel Holding Corp. (NYSE: AKS) will report its third-quarter earnings Tuesday before the market open. Thomson Reuters has consensus estimates of $0.09 in earnings per share and $1.49 billion in revenue. The third quarter from the previous year had -$0.23 in earnings per share and $1.33 billion in revenue.

The big question is not about the expected annual loss in 2014, but in the Thomson Reuters consensus estimate of $1.35 in earnings per share in 2015. That would be on a revenue gain of almost 22% to $7.48 billion, and would value AK Steel at only 5-times next year’s earnings. If all things live up to expectations, that would make 2013 the trough in poor revenue trends.

AK Steel may seem inconsequential to many investors because of the notion that it only has a market cap of $1 billion. The issue is that it trades around 13 million shares per day, and is in some ways the preferred trader’s way of speculating on steel. The biggest issue is that Alcoa has recovered handily in aluminum, while Barron’s recently pondered that US Steel could face a similar 50% recovery.

The 200-day moving average tried to act as support during the market sell-off but AK Steel fell under. The 200-day moving average has acted as major resistance in the last 4 trading sessions, reading at $7.58.

It seems hard to use options trading on a stock with a low price, but the options traders appear to be braced for a move of close to $0.40. That would be a move of up to nearly 6%.

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As far as recent analyst calls:

• Nomura upgraded AK Steel to a Buy rating from Neutral and raised its price target to $10 from $7.50, on October 17.
• Deutsche Bank upgraded AK Steel to a Buy rating from Hold and raised its price target to $10 from $7.25, on October 2.
• Merrill Lynch even saw the turnaround taking more steam back in June.

AK Steel shares closed down 1.8% at $7.43 on Monday. The company’s stock has a consensus analyst price target of $9.72 and a 52-week trading range of $4.36 to $11.37. As a reminder, AK Steel was a $20 stock at the start of 2010 and a $15 stock for about half of 2011.

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