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Why Is Allegheny Technologies (ATI) Up 40.1% Since Last Earnings Report?

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A month has gone by since the last earnings report for Allegheny Technologies (ATI). Shares have added about 40.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Allegheny Tops Earnings and Revenue Estimates in Q1

Allegheny recorded net income of $21.1 million or 16 cents per share in first-quarter 2020, up from $15 million or 12 cents per share in the prior-year quarter.

Excluding one-time items, adjusted earnings per share were 20 cents that beat the Zacks Consensus Estimate of 13 cents.

The company delivered revenues of $955.5 million in the quarter, down 4.9% year over year. Nevertheless, the figure surpassed the Zacks Consensus Estimate of $913 million.

Segment Highlights

In the first quarter, revenues in the High Performance Materials & Components (“HPMC”) segment declined 15.4% year over year to $420.3 million. The company noted that 85% of unit sales were attributable to the aerospace and defense markets. Also, sales of next-generation jet engine products contributed 50% to total HPMC jet engine product sales. Operating profit in the unit rose 10.4% year over year to $57.1 million.

The Advanced Alloys & Solutions (“AA&S”) segment’s sales rose 5.3% year over year to $535.2 million. Per the company, higher HRPF conversion services billings as well as the aerospace and defense markets supported the unit’s sales. Operating profit in the division totaled $24.1 million, which rose 141% year over year. Margins benefitted from improved results from the STAL joint venture and higher surcharges on raw materials.

Financial Position

Allegheny ended the quarter with cash and cash equivalents of $639 million, up 294.5% year over year. Long-term debt fell 9.5% year over year at $1,390 million.

Net cash used in operating activities for the first quarter was $115.4 million.

Outlook

The company withdrew its guidance for 2020 due to uncertainties created by the coronavirus outbreak. Going forward, it expects challenging and uncertain economic conditions to sustain due to the impacts of the coronavirus on the global aerospace industry.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -191.67% due to these changes.

VGM Scores

Currently, Allegheny Technologies has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. 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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