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Why Is Allegheny Technologies (ATI) Down 5.2% Since Last Earnings Report?

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It has been about a month since the last earnings report for Allegheny Technologies (ATI - Free Report) . Shares have lost about 5.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Allegheny Technologies due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Allegheny's Earnings and Sales Beat Estimates in Q2

Allegheny slipped to a net loss of $422.6 million or $3.34 per share in second-quarter 2020 from net income of $75.1 million or 54 cents per share in the prior-year quarter.

Excluding one-time items, adjusted loss per share were 2 cents, which was narrower than the Zacks Consensus Estimate of a loss of 10 cents.

The company delivered revenues of $770.3 million in the quarter, down 28.7% year over year. Nevertheless, the figure surpassed the Zacks Consensus Estimate of $666.8 million.

Segment Highlights

In the second quarter, revenues in the High-Performance Materials & Components (“HPMC”) segment declined 43.6% year over year to $300.7 million. The company noted that 84% of unit sales were attributable to the aerospace and defense markets. Sales of next-generation jet engine products contributed 41% to total HPMC jet engine product sales. Operating profit in the unit plunged 88.3% year over year to $9.2 million. Reduced asset utilization rates and lower overall demand affected operating margins.

The Advanced Alloys & Solutions (“AA&S”) segment’s sales fell 14.2% year over year to $469.6 million. Total sales to all energy markets declined 20% year over year. Operating profit in the division totaled $18.1 million, down 49.9% year over year.

Financial Position

Allegheny ended the second quarter with cash and cash equivalents of $539.1 million, up 91.7% year over year. Long-term debt fell 1.3% year over year at $1,516.9 million.

Cash provided by operating activities for the second quarter was $101 million.

Outlook

Allegheny expects the current challenging and uncertain economic conditions stemming from the coronavirus pandemic to continue throughout the remainder of 2020, at least. The company is undertaking major steps to mitigate the negative impacts on its financial results. It remains focused on ensuring a strong balance sheet along with preserving free cash flows.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -454.55% due to these changes.

VGM Scores

Currently, Allegheny Technologies has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Allegheny Technologies has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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