Allegheny (ATI) Q3 Earnings Meet, Revenues Beat Estimates

Allegheny Technologies Inc. (NYSE:ATI) recorded net income of $111 million or 78 cents per share in third-quarter 2019, up from profit of $50.5 million or 37 cents per share in the prior-year quarter.

Excluding one-time items, adjusted earnings per share were 33 cents, meeting the Zacks Consensus Estimate.

The company delivered revenues of $1,018.7 million in the quarter, down roughly 0.2% year over year. However, the figure surpassed the Zacks Consensus Estimate of $993.5 million.

Allegheny Technologies Incorporated Price, Consensus and EPS Surprise

Allegheny Technologies Incorporated price-consensus-eps-surprise-chart | Allegheny Technologies Incorporated Quote

Segment Highlights

In the third quarter, revenues in the High Performance Materials & Components (“HPMC”) segment declined around 5.8% year over year to $551.7 million. The downside can be attributed to the divestment of titanium investment castings and industrial forgings businesses. Also, sales in the aerospace and defense markets fell 2% from the year-ago quarter’s level. Operating profit in the unit rose around 3.7% year over year to $78.8 million.

The Flat-Rolled Products (“FRP”) segment’s sales rose around 7.4% year over year to $467 million. Per the company, sales of high-value products more than offset lower sales of standard products. Operating profit in the division totaled $20.4 million, which declined 30.8% year over year. The downside reflects higher retirement benefit expenses and the impact of Section 232 tariffs related to Allegheny’s A&T Stainless joint venture.

Financial Position

The company ended the third quarter with cash and cash equivalents of $511.3 million, up more than 233% year over year. Long-term debt rose to $1,541.7 million from $1,535.3 million in the year-ago quarter.

Net cash used in operating activities was $10 million for the first nine months of 2019.

Outlook

For the HPMC unit, the company expects backlogs for single-aisle platforms to remain strong. However, it expects uneven order patterns along with inventory management actions by customers to negatively impact shipments in the fourth quarter of 2019. This is likely to partly lower the benefit from Allegheny’s larger share of high-value commercial jet engine materials and components.

For the FRP segment, the company expects consistent profitability in the fourth quarter of 2019 on sustained strength in high-value products, which includes both the U.S. and its STAL joint venture.Also, the favorable impact of higher nickel prices on raw material surcharge values is expected to drive performance of the segment.

Price Performance

Shares of Allegheny have lost 22% in the past year compared with the industry’s 12.1% decline.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the basic materials space are Kinross Gold Corporation (NYSE:KGC) , Franco-Nevada Corporation (TSX:FNV) and Kirkland Lake Gold Ltd. (TSX:KL) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kinross has an expected earnings growth rate of 210% for 2019. The company’s shares have surged 76.4% in the past year.

Franco-Nevada has a projected earnings growth rate of 39.3% for 2019. The company’s shares have rallied 48.8% in a year.

Kirkland Lake Gold has an estimated earnings growth rate of 93.4% for the current year. Its shares have moved up 132% in the past year.

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