Shares of Allegheny Technologies (ATI 3.99%) slumped on Tuesday, falling as much as 9.9% by 10:45 a.m. EDT. Driving the decline was its poorly received third-quarter results.
Allegheny Technologies reported sales of $771 million, which was 7.5% below last year's third quarter and missed analysts' expectations by $45 million. Additionally, the company reported a net loss of $531 million, or $4.95 per share. That said, $508 million (or $4.74 per share) of that loss was due primarily to idling its Rawley plant. After adjusting for these items, the company's loss was $23 million, or $0.21 per share, which was $0.11 per share wider than analysts were expecting.
Driving the weaker-than-expected results, according to comments by CEO Rich Harshman, were the "continuing challenging business conditions and low demand from several non-aerospace markets." In particular, sales to electrical energy, oil and gas, and the construction and mining equipment markets were under pressure. Partially offsetting this were strong sales to aerospace customers, with Harshman noting that the company is benefiting from the "transition to next generation from legacy aircraft and engines."
That same shift is driving results at aluminum producer Alcoa (AA), which noted in its third-quarter report:
The global aerospace market continues to undergo a transition as new aero engine launches accelerate demand, outpacing near-term demand for airframe components, which is being partially absorbed through de-stocking. As a result, Alcoa forecasts full-year 2016 aircraft deliveries to be flat to up 3%. Strong market fundamentals continue to drive long-term demand.
Despite those stronger market conditions, Allegheny Technologies continues to restructure its business to return the company to sustainable profit growth. Its latest restructuring efforts include the announcement that it will permanently close its Midland and Bagdad plants, which it had idled earlier this year. The company said that these facilities could no longer be "operated at an acceptable rate of return." Because of these closures, the company anticipates additional restructuring charges in the fourth quarter.
While Allegheny's key aerospace segment is performing well, the company continues to struggle due to weakness across many of its other customer segments. That is forcing the company to take additional actions to reduce its costs to boost profitability. Allegheny believes that its latest efforts will improve its earnings next year and put it back on the path to sustainable profit growth.