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Allegheny Technologies (ATI) Down 4.6% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Allegheny Technologies (ATI). Shares have lost about 4.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Allegheny Technologies due for a breakout? 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 Q2 Earnings and Revenues Surpass Estimates

Allegheny recorded net loss of $49.2 million or 39 cents per share in second-quarter 2021 compared with a loss of $422.6 million or $3.34 per share in the prior-year quarter.

Barring one-time items, adjusted loss was 12 cents per share, narrower than the Zacks Consensus Estimate of a loss of 20 cents.

The company delivered revenues of $616.2 million in the quarter, down 20% year over year. Nevertheless, the figure surpassed the Zacks Consensus Estimate of $582 million.

Segment Highlights

In the second quarter, revenues in the HPMC segment totaled $300.6 million, flat year over year. The company stated that sales figure reflected lower commercial aerospace sales driven by pandemic, offset by higher government defense and energy markets sales. EBITDA in the unit was $37.2 million compared with $28.7 million in the prior-year quarter. Higher production volumes and cost-cutting actions aided operating margins.

The AA&S segment’s sales fell 33.3% year over year to $315.6 million, owing to impacts from the strike as well as the exit from the standard stainless sheet market. EBITDA in the division totalled $36 million compared with $33.4 million in the prior-year quarter. Richer product mix, including a smaller proportion of standard stainless products, benefit from raw material price changes and gains from 2020 cost reductions have improved operating margin.

Financial Position

Allegheny ended the quarter with cash and cash equivalents of $472.5 million, down 12.4% year over year. Long-term debt increased 5.6% year over year at $1,602.2 million.

Cash used in operating activities for the first half of 2021 was $102.6 million.

Outlook

Allegheny expects continued recovery in its jet engine market in the third quarter. The recovery is expected to be driven by increasing narrow body aircraft production rates as well as ongoing strength in its energy and electronics end markets.

It anticipates lingering effects on its SRP business, with production levels returning to pre-strike levels across the balance of the third quarter. However, despite this challenge in the near term, ongoing global economic recovery is gradually expanding and providing optimism for its most impactful end markets, Allegheny noted.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 100% due to these changes.

VGM Scores

At this time, Allegheny Technologies has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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. Notably, Allegheny Technologies has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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