Allegheny (ATI) Faces Pricing Woes, Flat-Rolled Challenges
On Sep 11, we issued an updated research report on Allegheny Technologies ATI.
Allegheny posted higher loss in the second quarter of 2015, hurt by weak demand across its operations. The loss, however, was lower than the Zacks Consensus Estimate. Sales fell year over year, and missed expectations.
Allegheny continues to see certain challenges in its core Flat-Rolled Products segment. Weak demand and increased Asian imports are putting pressure on stainless steel sheet plate prices.
Imports of cold rolled stainless sheet and strip from China surged 115% in 2014 and the trend continues in 2015. Imports of these products from China rocketed 150% year over year during the first five months of 2015. Demand for flat-rolled products in industrial markets also remains somewhat weak. Allegheny expects selling prices and demand for its standard stainless products to remain under pressure until raw material prices recover and the level of imports normalize.
Moreover, profitability in the Flat-Rolled Products division is expected to remain affected by costs associated with the Hot-Rolling and Processing Facility (HRPF) project.
In addition, results from Allegheny’s High Performance segment remain affected by low operating rates at its Rowley titanium sponge facility and its move to use company-produced titanium sponge in place of lower cost titanium units to make certain titanium products.
Lower oil prices have also created an uncertain demand environment for the company’s products in drilling applications in the oil and gas industry (10% of total sales in 2014). Allegheny anticipates demand from the oil and gas market to remain low through the end of 2015, and even longer. The company expects its sales for drilling applications to be more than 20% to 25% lower year over year in 2015.
Allegheny currently sports a Zacks Rank #5 (Strong Sell).
Other Stocks to Consider
Better-ranked companies in the basic materials space include NN Inc. NNBR, Global Brass and Copper Holdings, Inc. BRSS and NSK Ltd. NPSKY with all holding a Zacks Rank #2 (Buy).
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ALLEGHENY TECH (ATI): Free Stock Analysis Report
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