Please ensure Javascript is enabled for purposes of website accessibility

Why Allegheny Technologies Stock Just Jumped 10%

By Rich Smith - Updated Jul 25, 2017 at 4:52PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

At long last, the cash is starting to roll in.

What happened

Shares of aerospace components and specialty metals maker Allegheny Technologies (ATI 0.38%) stock are up 10.4% as of 2:55 p.m. EDT.

So what

Allegheny Technologies -- which despite the name is anything but a tech stock -- reported  Q2 earnings this morning. Revenue of $880.2 million exceeded analyst expectations, as did earnings, with Allegheny reporting per-share profits of $0.09 for the quarter -- two cents ahead of the consensus. 

Titanium sheet

Allegheny Technologies' earnings -- shiny! Image source: Getty Images.

Now what

Management noted that "market conditions in the second quarter [of] 2017 were slightly improved in the oil [and] gas market, stable in aerospace and defense, but weaker in automotive and consumer durables."

Looking forward, Allegheny advised investors to expect further "strong performance in commercial aerospace" in the second half of 2017, with operating profit margins in the "low-double-digit" range. Profit margin in the company's flat-rolled metals segment, however, is expected to fall "significantly" in the near term, and this part of the business is forecast to produce an operating loss in the second half of the year.

One bit of information that could prove useful to investors frustrated by Allegheny's history of cash burn: Allegheny has made significant investments in capital improvements these past few years, spending as much as $613 million in 2013, for example, and more than $145 million in the first half of 2016 alone. This capital investment has siphoned off cash flows and left the company free cash flow-negative for years at a time.

Management says, however, that it expects capex to average no more than $100 million annually "for the next several years." With Allegheny having already racked up operating cash flow of more than $85 million so far this year, this implies that the company will be generating some pretty strong cash profits.

After four straight years  of burning cash, this will be a welcome change.

Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Allegheny Technologies Incorporated Stock Quote
Allegheny Technologies Incorporated
ATI
$31.41 (0.38%) $0.12

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/15/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.