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Why Allegheny Technologies Stock Is Up Today

By Lou Whiteman – Oct 28, 2021 at 2:23PM

Key Points

  • Allegheny was hard hit by the pandemic-related commercial aerospace slowdown, but the sector is showing signs of improvement.
  • The company beat earnings expectations in the third quarter, and said the fourth quarter could come in ahead of estimates as supply chains normalize and production ramps up.

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The company beat on earnings and is optimistic about the rest of the year.

What happened

Shares of Allegheny Technologies (ATI 3.30%) took flight on Thursday, gaining more than 10% after the specialties metals manufacturer delivered solid third-quarter results and provided optimistic guidance about the fourth quarter.

So what

Allegheny makes specialty metal alloys and high-performance materials for the aerospace, defense, energy, and electronics markets, and due to its exposure to aerospace the company was hit hard by the pandemic and its impact on the airline industry. But in its third-quarter earnings report, Allegheny provided a clear signal the worst is over.

A stack of metal sheets.

Image source: Getty Images.

The company reported adjusted earnings of $0.05 per share for the quarter on revenue of $726 million, easily topping analyst expectations for a $0.02 per share loss on revenue of $676 million. The company's alloys business improved its EBIT margin to 10.6% in the quarter, from 6.3% in the second quarter, and high-performance materials margin was up slightly from the prior period.

CEO Robert S. Wetherbee said in a statement that commercial aerospace is "showing ongoing signs of recovery," enabling the company to begin to normalize operations.

"We are laser-focused, locking in our cost structure improvements as our end markets begin to show signs of sustained recovery," Wetherbee said. "Our end-market diversity fuels our ability to maximize gains in this unbalanced economic recovery."

Now what

Allegheny expects a strong end to the calendar year, forecasting earnings of between $0.07 and $0.13 in the fourth quarter. That implies some upside to the $0.07 consensus. Wetherbee noted that demand for some specialty materials used in jet engines was mixed, varying by customer due to issues across supply chains. Should logistics improve in the months to come, Allegheny should see higher demand.

In the early days of the pandemic Allegheny shares lost more than 75% of their value. The stock has recovered most of those losses since then, but is still down nearly 17% from the beginning of 2020. If demand is really beginning to take off, the stock has room to gain altitude from here.

Lou Whiteman owns shares of Allegheny Technologies. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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