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Allegheny Technologies (ATI) Up 5.2% Since Last Earnings Report: Can It Continue?

Zacks Equity Research
·4-min read

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

Will the recent positive trend continue leading up to its next earnings release, or is Allegheny Technologies due for a pullback? 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 drivers.

Allegheny's Earnings and Revenues Beat Estimates in Q1

Allegheny recorded a net income of $30.9 million or 23 cents per share in first-quarter 2022 versus a loss of $7.9 million or 6 cents per share in the prior-year quarter.

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Barring one-time items, adjusted earnings were 40 cents per share, beating the Zacks Consensus Estimate of 22 cents.

The company delivered revenues of $834.1 million in the quarter, up 20% year over year. The figure surpassed the Zacks Consensus Estimate of $750.8 million.

Segment Highlights

In the first quarter, revenues in the High-Performance Materials & Components (“HPMC”) segment totaled $341.6 million, up 41.8% year over year. The sales growth reflects higher sales across nearly all end markets, led by commercial jet engines. EBITDA in the unit was $68.1 million compared with $24.6 million in the prior-year quarter. Higher raw material costs outpaced quarterly index pricing mechanisms for mill product sales, leading to margin compression compared with the prior periods.

The Advanced Alloys & Solutions (AA&S) segment’s sales rose 9% year over year to $492.5 million, owing to higher selling prices. EBITDA in the division totaled $75.3 million compared with $49.7 million in the prior-year quarter. The results were driven by a stronger mix of nickel-alloy mill products.

Financial Position

Allegheny ended the quarter with cash and cash equivalents of $316.7 million, down 53.9% sequentially. Long-term debt was flat sequentially at $1,707.4 million.

Cash used in operating activities in the first quarter was $217.2 million.

Outlook

Allegheny projects continued growth in its most significant end markets. The company’s lean cost structures will help it improve earnings and margins from the year-ago levels amid the prevailing environment. It expects to continue improving inventory efficiency, balanced with ensuring an adequate supply of input materials to achieve growth.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

The consensus estimate has shifted 30.99% due to these changes.

VGM Scores

At this time, Allegheny Technologies has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Allegheny Technologies has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Allegheny Technologies is part of the Zacks Steel - Speciality industry. Over the past month, Carpenter Technology (CRS), a stock from the same industry, has gained 0.2%. The company reported its results for the quarter ended March 2022 more than a month ago.

Carpenter reported revenues of $489 million in the last reported quarter, representing a year-over-year change of +39%. EPS of -$0.20 for the same period compares with -$0.54 a year ago.

Carpenter is expected to post earnings of $0.04 per share for the current quarter, representing a year-over-year change of +114.3%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

Carpenter has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.


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