Allegheny (ATI) Inks Long-Term Deals With General Dynamics

Allegheny Technologies Incorporated (NYSE:ATI) has signed two Long-Term Pricing Agreements (LTPAs) with General Dynamics (NYSE:GD) Land Systems. Per the deal, the company will supply titanium plate for the Abrams tank (United States) and the AJAX specialist vehicle (United Kingdom). While the Abrams agreement runs through 2019, the AJAX contract runs until 2021.

Revenues from the LTPAs are expected to be around $75 million over the contract periods. This will lead to a significant increase in Allegheny’s Flat Rolled Products segment’s strategic Aerospace and Defense market sales, which are an integral part of the company’s ongoing portfolio transformation toward more high-value products.

Production of the titanium products will commence at Allegheny’s melt facility in Richland, WA and will be completed at the company’s Specialty Plate facility in Washington, PA.

Allegheny’s shares have moved up 64.2% in the last six months, outperforming the industry’s 41.4% growth.

Allegheny, in October 2017, said that it expects the High Performance Metals and Components 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 Flat-Rolled Products unit is expected to benefit from increasing raw material prices in the fourth quarter of 2017. The company expects operational improvements and product mix benefits to continue 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.

Moreover, Allegheny continues to improve its cost structure with its gross cost-reduction initiative. The Meltless titanium process helps the company reduce the steps in producing titanium alloy powders by directly moving to alloy powders and lower the cost of process. The technology also utilizes lower cost raw materials and makes it possible to produce novel alloys which cannot be processed using existing technologies.

Allegheny Technologies Incorporated Price and Consensus

Allegheny Technologies Incorporated Price and Consensus | Allegheny Technologies Incorporated Quote

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the basic materials space are Huntsman Corporation (NYSE:HUN) , Koppers Holdings Inc. (NYSE:KOP) and Air Products and Chemicals, Inc. (NYSE:APD) . While Huntsman sports a Zacks Rank #1 (Strong Buy), both Koppers and Air Products carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Huntsman has an expected long-term earnings growth rate of 8%. Its shares have soared 74.5% over a year.

Kronos Worldwide has an expected long-term earnings growth rate of 5%. Its shares have surged 112.4% over a year.

Koppers has an expected long-term earnings growth of 18%. The stock has gained around 21% over a year.

Air Products has an expected long-term earnings growth of 14.1%. Its shares are up roughly 17% over a year.

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