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Allegheny (ATI) Reports Q3 Loss, Revenues Beat Estimates

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Allegheny Technologies Inc. (ATI - Free Report) reported a net loss of $121.2 million or $1.12 per share for third-quarter 2017 as compared with the prior-year loss of $530.8 million or $4.95 per share.

Excluding an earlier-announced goodwill impairment charge of $113.6 million related to the Cast Products business, adjusted loss came in at $7.6 million or 7 cents per share for third-quarter 2017, narrower than the year-ago loss of $22.5 million or 21 cents. Loss per share for the reported quarter was in line with the Zacks Consensus Estimate.

Revenues for the quarter rose 12.8% year over year to $869.1 million, beating the Zacks Consensus Estimate of $865.1 million.

Allegheny Technologies Incorporated Price, Consensus and EPS Surprise

 

Segment Highlights

Revenues from the High Performance Materials & Components (HPMC) segment improved 11% year over year to $512.9 million in the third quarter due to increased sales of nickel-based and specialty alloys, and forged and cast components. Operating profit increased to $61.7 million from $47 million in the prior-year quarter. The segment’s profit reflects higher productivity from increasing aerospace and defense sales, an improved product mix of next-generation nickel alloys and forgings for the aero engine market and benefits of the 2016 titanium operation-restructuring activities.

The Flat-Rolled Products (FRP) segment’s sales rose 15% year over year to $356.2 million on the back of higher shipment volume for both high-value and standard stainless products and modestly higher selling prices of standard stainless and Precision Rolled Strip products. The segment’s operating loss came in at $7.3 million compared with the year-ago quarter loss of $20.8 million. Results were adversely impacted by a sharp decline in raw material prices, which more than offset the favorable impact of higher operating levels and the benefits of cost reductions and restructuring actions.

Financial Position

Allegheny’s cash in hand as of Sep 30, 2017 was $124.9 million, down 33.7% year over year. Long-term debt inched up 0.4% to $1,877.7 million.

The company generated operating cash flows of $32 million in the quarter. Total debt-to-total capitalization was 58.9% at the end of the third quarter, up from 56.3% a year ago.

Outlook

Moving ahead, Allegheny expects HPMC unit to maintain robust performance especially in the commercial aerospace. Further, the company expects the unit to deliver improved results in the fourth quarter compared with the third.

The FRP unit is expected to benefit from increasing raw material prices in the fourth quarter. The company sees operational improvements and product mix benefits to be carried over in 2018.

Allegheny anticipates significant profit improvement opportunities in 2018, aided by the completion of the start-up and qualification of its new nickel alloys powder facility. Capital expenditures are expected to be around $100 million annually for the next several years.

Price Performance

Shares of Allegheny have moved up 58.2% over a year, outperforming the industry’s gain of 39.7%.

 


 

Zacks Rank & Key Picks

Allegheny currently carries a Zacks Rank #3 (Hold).

Some better-ranked companies in the basic materials space are FMC Corporation (FMC - Free Report) , Koppers Holdings Inc. (KOP - Free Report) and Air Products and Chemicals, Inc. (APD - Free Report) .

FMC Corporation has an expected long-term earnings growth rate of 11.3% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Koppers Holdings has an expected long-term earnings growth rate of 18% and flaunts a Zacks Rank #1.

Air Products has an expected long-term earnings growth rate of 12.1% and carries a Zacks Rank #2 (Buy).

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