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What: Shares of U.S. steel producer AK Steel (NYSE:AKS) sank 10% today after its Q3 outlook disappointed Wall Street.

So what: The stock has bounced nicely over the past few months on signs of improving fundamentals, but today's downbeat guidance for Q3 is forcing Mr. Market to sober up quickly. While management blamed the bleak view on an outage at one of its blast furnaces, suggesting that the problem is temporary, AK won't be able to take full advantage of rising steel spot prices -- a particularly big hit given the company's highly precarious financial position.   

Now what: Management now expects to take a per-share loss of $0.22-$0.27 on shipments of 1.2 million-1.3 million tons of steel, down from 1.4 million tons a year ago. "As a result of the outage, the company's melt production during the quarter has been reduced, resulting in a delay of shipments to some carbon spot market customers and an overall reduction in shipments during the quarter," the company wrote in a statement. Given AK's still-hefty debt load and hypersensitivity to steel prices, I'd wait for an even wider margin of safety before exposing myself to those troubles.

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