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Allegheny Technologies (ATI - Analyst Report) has extended its long-term alliance with aircraft maker The Boeing Company (BA - Analyst Report). The Pennsylvania-based metals processor said that it has expanded its titanium products supply pact with the aerospace giant. The terms of the deal, however, were not divulged.  

The extended agreement covers value-added titanium mill products and offers opportunity for increased use of Allegheny’s next-generation and advanced titanium alloys in both long product and flat-rolled product forms. The agreement reinforces the company’s relationship with Boeing and underscores the increasing needs to offer enabling technology and value-added titanium products. The expanded deal will allow Allegheny to participate in Boeing’s significant growth over the next several years.

Allegheny sees a loss in the third quarter of 2013 due to a host of headwinds including challenging business environment, lower shipments of several key products, higher raw material costs and pricing pressure. The company is also restructuring its Engineered Products segment as part of its efforts to focus more on its strategic businesses.

Allegheny should benefit from its new alloys and products, diversified global growth markets and differentiated product mix. The company is in the process of finishing several self-funded capital projects, including the $1.2 billion Hot-Rolling and Processing Facility (HRPF), which would help augment organic growth.

Allegheny continues to improve its cost structure with its gross cost reduction initiative. The company should gain from healthy demand across aerospace, oil, electrical energy and medical industries. It is seeing improving demand from aerospace OEMs.

However, Allegheny is contending with a soft economy and raw material cost pressures. Reduced raw material surcharges and low base prices of standard stainless products are hurting the results of its key Flat-Rolled Products segment. The business environment is expected to remain challenging through the remainder of 2013 given the uncertain economic backdrop.

Allegheny, which currently holds a Zacks Rank #4 (Sell), will report its third quarter results on Oct 23.

Other companies in the basic materials sector with favorable Zacks Rank are Companhia Siderurgica Nacional (SID - Analyst Report) and Shiloh Industries Inc. with both retaining a Zacks Rank #1 (Strong Buy).

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