Shares of Allegheny Technologies Inc. (ATI) hit a new 52-week high of $35.89 on Dec 30 and eventually closed at $35.47. The shares of this specialty metals maker have been on the rise since it reported its third quarter results on Oct 23.
Year-to-date, share price has recorded a healthy return of 19.63%. The company’s long-term estimated EPS growth rate is 15%. Average volume of shares traded over the last three months came in at approximately 1.25 million.
Allegheny is primarily focusing on cost optimization and is accelerating its cost reduction efforts. Through this move, the company was successful in gross cost reductions of $123.4 million in during the first nine months of 2013, a pace which is well ahead its 2013 target of $100 million in new cost reductions. The company remains well positioned to align its production, and inventory levels to match the demands of its customers and end markets.
Allegheny has a solid liquidity position with no borrowings outstanding under its domestic borrowing facility, and none are expected in the fourth quarter of 2013. The company expects to considerably increase its liquidity and financial flexibility with the sale of its tungsten materials business.
Despite short-term challenging conditions, Allegheny remains optimistic and expects strong profitable growth opportunities over the next 3 to 5 years. The company is focused on taking necessary actions to sail through the current challenging global economic conditions, while continuing to strengthen its position for future profitable growth.
The restructuring action taken is an important part of this strategy. The company, in Oct 2013, announced the restructuring of its Engineered Products segment, which is one of the main business segments originally held by Allegheny.
As a restructuring initiative, Allegheny, on Nov 4, 2013, completed the sale of its tungsten materials business to Latrobe, PA-based wear-resistant products company Kennametal Inc. (KMT) for $605 million. Allegheny divested its tungsten materials business so that it can focus more on its core businesses – High Performance Metals and Flat-Rolled Products. The acquisition is expected to increase Allegheny’s financial flexibility and simplify its capital allocation and deployment.
Allegheny is also taking number of actions which include negotiating new and extending existing long-term agreements with strategic customers, positioning its titanium sponge facility in Rowley, Utah for the premium-grade (PQ) qualification program and completing construction of Hot-Rolling and Processing Facility (:HRPF) to initiate and complete the cold- and hot-commissioning process in 2014. The company foresees strong market trends and fundamentals over the long term in the commercial aerospace, oil and gas, medical and automotive markets.
Allegheny further expects 2013 capital expenditures to be roughly $600 million, with 80% of this being associated with HRPF. The company expects to end 2013 with roughly $1.4 billion of cash and available liquidity.
Other Stocks to Consider
Allegheny currently carries a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the steel industry include Companhia Siderurgica Nacional (SID) and AK Steel Holding Corp. (AKS). While Companhia Siderurgica holds a Zacks Rank #1 (Strong Buy), United States Steel retains a Zacks Rank #2 (Buy).