Allegheny's (ATI) Earnings And Revenues Beat Estimates In Q2

Allegheny Technologies Inc. (NYSE:ATI) recorded net income of $75.1 million or 54 cents per share in second-quarter 2019, up from a profit of $72.8 million or 52 cents in the prior-year quarter.

Barring one-time items, adjusted earnings per share came in at 40 cents and beat the Zacks Consensus Estimate of 35 cents.

The company delivered revenues of $1,080.4 million in the quarter, up roughly 7% year over year. Also, the figure surpassed the Zacks Consensus Estimate of $1,060.7 million.

Segment Highlights

In the second quarter, revenues in the High Performance Materials & Components (HPMC) segment rose around 8.5% year over year to $642.4 million. The upside can be attributed to higher demand for titanium-based products. Also, sales in the aerospace and defense markets were 17% higher from the year-ago quarter’s level. Notably, commercial airframe market sales surged 40% year over year. Operating profit in the unit rose around 1% year over year to $98.9 million.

The Flat-Rolled Products (FRP) segment’s sales rose around 5% year over year to $438 million. Per the company, sales of high-value products more than offset lower sales of standard products. Operating profit in the division totaled $15.6 million, which declined 40.2% year over year. The downside reflects higher retirement benefit expenses and loss for Allegheny’s share in the A&T Stainless joint venture stemming from the Section 232 tariffs.

Financial Position

Allegheny ended the second quarter with cash and cash equivalents of $281.2 million, up more than two-folds year over year. Long-term debt rose to $1,537.1 million from $1,535.5 million in the year-ago quarter.

Net cash used in operating activities was $104.4 million for the first six months of 2019.

Outlook

For the HPMC unit, the company stated that demand for single-aisle platforms remains strong. However, it expects uneven order patterns along with inventory management actions by a major aero-engine customer to negatively impact shipments in the second half of 2019. This will partly lower the benefit from larger share of high value commercial jet engine materials and components.

For the FRP segment, the company expects consistent profitability in the second half of 2019 on the back of improved customer demand for high-value products, including the U.S. and for the STAL joint venture. Also, higher carbon conversion volumes and favorable raw material surcharge value are expected to drive performance in the segment. The company is focused on sustaining profitability by increasing asset utilization of its Hot-Rolling and Processing Facility as well as improving the product mix.

Price Performance

Shares of Allegheny have lost 17.3% in the past year compared with the industry’s 15.7% decline.

Zacks Rank & Key Picks

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

Some better-ranked stocks in the basic materials space are SSR Mining Inc (NASDAQ:SSRM) , Kinross Gold Corporation (NYSE:KGC) and Arconic Inc. (NYSE:ARNC) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

SSR Mining has an expected earnings growth rate of 69.6% for 2019. The company’s shares have rallied 48.2% in the past year.

Kinross has projected earnings growth rate of 80% for the current year. The company’s shares have gained 14.1% in a year’s time.

Arconic has an estimated earnings growth rate of 38.2% for the current year. Its shares have moved up 30.7% in the past 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 >>