What happened
Shares of Allegheny Technologies (ATI 0.45%) gained as much as 19% on Wednesday after the aerospace component supplier reported earnings that easily beat expectations. Allegheny was upbeat about future quarters as well, helping to fuel the stock's surge higher.
So what
Allegheny is a specialty metals company that makes components for a range of industries, but with a heavy emphasis on aerospace. That business was hit hard by the pandemic, which caused airlines to abandon expansion plans and ate into demand for new planes. Shares of Allegheny lost more than half of their value in the early days of the pandemic, and the stock has not yet fully recovered.
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But the company's latest quarterly earnings report provided clear signs of improvement. Allegheny earned $0.25 per share in the fourth quarter on revenue of $765.4 million, easily besting analyst expectations for a $0.10-per-share profit on sales of $725 million. Operating income came in at $67.2 million for the quarter, up 125% from the third quarter and a huge improvement over the $1.09 billion operating loss in the same quarter of 2020.
CEO Robert S. Wetherbee said in a statement, "the aerospace market continues to recover," and that the impact of the company's cost-cutting during the pandemic is creating a benefit.
"Our fourth quarter results reflect growing momentum in our business," he said. "We eclipsed 2019's full-year adjusted EBITDA margins for the second straight quarter despite lower revenues. This demonstrates that we're maintaining our lean cost structures and improving our product mix and pricing.
Now what
Allegheny has an investor day planned for Feb. 17, and investors are likely to hear a lot of commentary on expectations for the future, but the near-term outlook is bright. The company said it expects to earn between $0.18 and $0.26 per share in the current quarter, significantly better than the $0.11-per-share consensus estimate, and for the full year it expects earnings of $0.85 to $1.05 per share. Wall Street was expecting $0.65 per share in earnings.
Allegheny plays a vital role in the aerospace supply chain, and the company's fortunes are closely tied to the broader commercial aviation market. If conditions continue to improve and there are no new pandemic-related setbacks, Allegheny shares can still gain altitude from here.
