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Allegheny Technologies Inc. (ATI - Free Report) reported net earnings of $72.8 million or 52 cents per share in second-quarter 2018, up from $10.1 million or 9 cents in the prior-year quarter. Earnings per share topped the Zacks Consensus Estimate of 36 cents.
The company reported revenues of $1,009.5 million for the quarter, up 15% year over year. However, sales missed the Zacks Consensus Estimate of $1,023.5 million.
Allegheny Technologies Incorporated Price, Consensus and EPS Surprise
Revenues from the High Performance Materials & Components (HPMC) segment improved roughly 12% year over year to $591.9 million. The upside was driven by increased sales of next-generation jet engine products.
Operating profit increased to $97.9 million from $68 million in the prior-year quarter. The improvement was mainly driven by better product mix of next-generation nickel alloys, forgings for the aero engine market and higher productivity from increasing aerospace as well as defense sales.
The Flat-Rolled Products (FRP) segment’s sales rose 18% year over year to $417.6 million on the back of higher shipment volume for high-value products, primarily nickel-based and specialty alloys. While standard products sales in this segment rose 6%, the same for high-value products went up 27%.
The segment’s operating profit came in at $26.1 million, up from the year-ago quarter’s figure of $2.9 million. The upside can be attributed to the recently-formed A&T Stainless joint venture, improved cost absorption through higher operating rates along with a better matching of raw material surcharges with changes in prices for ferrochrome, nickel and other metallics.
Financial Position
Allegheny’s cash in hand as of Jun 30, 2018 was $122.4 million, down 20.8% year over year. Long-term debt fell 18.2% to $1,535.5 million.
The company generated operating cash flows of $25 million in the quarter. Outlook
Going forward, Allegheny continues to expect year-over-year growth in operating margin and revenues in the HPMC division in the second half of 2018 on the back of improved asset utilization and growth in aerospace market demand.
Allegheny also expects strong end-market demand in the FRP unit to continue and benefit from current operational improvements. It also anticipates growth in differentiated products and benefits from the A&T Stainless joint venture.
The company reiterated that it anticipates a strong second-half cash generation with at least $150 million of free cash flow for f 2018, which excludes contributions to the ATI Pension Plan.
Price Performance
Shares of Allegheny have lost 3% in the past three months against the industry’s rise of 1.5%.
Zacks Rank & Other Stocks to Consider
Allegheny currently sports a Zacks Rank #1 (Strong Buy).
KMG Chemicals has an expected long-term earnings growth rate of 28.5%. Its shares have returned 40.5% in a year.
Methanex has an expected long-term earnings growth rate of 15%. Its shares have rallied 48.3% in a year.
BHP Billiton has an expected long-term earnings growth rate of 5.3%. Its shares have gained 20% in a year.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Allegheny's (ATI) Q2 Earnings Top, Sales Trail Estimates
Allegheny Technologies Inc. (ATI - Free Report) reported net earnings of $72.8 million or 52 cents per share in second-quarter 2018, up from $10.1 million or 9 cents in the prior-year quarter. Earnings per share topped the Zacks Consensus Estimate of 36 cents.
The company reported revenues of $1,009.5 million for the quarter, up 15% year over year. However, sales missed the Zacks Consensus Estimate of $1,023.5 million.
Allegheny Technologies Incorporated Price, Consensus and EPS Surprise
Allegheny Technologies Incorporated Price, Consensus and EPS Surprise | Allegheny Technologies Incorporated Quote
Segment Highlights
Revenues from the High Performance Materials & Components (HPMC) segment improved roughly 12% year over year to $591.9 million. The upside was driven by increased sales of next-generation jet engine products.
Operating profit increased to $97.9 million from $68 million in the prior-year quarter. The improvement was mainly driven by better product mix of next-generation nickel alloys, forgings for the aero engine market and higher productivity from increasing aerospace as well as defense sales.
The Flat-Rolled Products (FRP) segment’s sales rose 18% year over year to $417.6 million on the back of higher shipment volume for high-value products, primarily nickel-based and specialty alloys. While standard products sales in this segment rose 6%, the same for high-value products went up 27%.
The segment’s operating profit came in at $26.1 million, up from the year-ago quarter’s figure of $2.9 million. The upside can be attributed to the recently-formed A&T Stainless joint venture, improved cost absorption through higher operating rates along with a better matching of raw material surcharges with changes in prices for ferrochrome, nickel and other metallics.
Financial Position
Allegheny’s cash in hand as of Jun 30, 2018 was $122.4 million, down 20.8% year over year. Long-term debt fell 18.2% to $1,535.5 million.
The company generated operating cash flows of $25 million in the quarter.
Outlook
Going forward, Allegheny continues to expect year-over-year growth in operating margin and revenues in the HPMC division in the second half of 2018 on the back of improved asset utilization and growth in aerospace market demand.
Allegheny also expects strong end-market demand in the FRP unit to continue and benefit from current operational improvements. It also anticipates growth in differentiated products and benefits from the A&T Stainless joint venture.
The company reiterated that it anticipates a strong second-half cash generation with at least $150 million of free cash flow for f 2018, which excludes contributions to the ATI Pension Plan.
Price Performance
Shares of Allegheny have lost 3% in the past three months against the industry’s rise of 1.5%.
Zacks Rank & Other Stocks to Consider
Allegheny currently sports a Zacks Rank #1 (Strong Buy).
A few other top-ranked stocks in the basic materials space are KMG Chemicals, Inc. , Methanex Corporation (MEOH - Free Report) and BHP Billiton Limited (BHP - Free Report) , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
KMG Chemicals has an expected long-term earnings growth rate of 28.5%. Its shares have returned 40.5% in a year.
Methanex has an expected long-term earnings growth rate of 15%. Its shares have rallied 48.3% in a year.
BHP Billiton has an expected long-term earnings growth rate of 5.3%. Its shares have gained 20% in a year.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>