Specialty metals company
Allegheny Technologies Inc.
) reported second-quarter 2012 earnings of 50 cents per share, down
from 59 cents recorded a year ago. The results missed the Zacks
Consensus Estimate by 4 cents. Profit fell 11.9% year over year to
$56.4 million. Excluding acquisition related charges, earnings in
the year-ago quarter were 70 cents a share.
ALLEGHENY TECH (ATI): Free Stock Analysis
CARPENTER TECH (CRS): Free Stock Analysis
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Revenues inched up 0.4% year over year to $1,357.4 million, also
missing the Zacks Consensus Estimate of $1,371 million. The company
witnessed growth across its High Performance Metals and Engineered
Products segments while sales fell in its Flat-Rolled Products
division in the quarter. Slow economic growth across the U.S. and
China coupled with weak conditions in Europe hurt demand for the
company's products in the quarter.
Operating profit fell 7.8% year over year to $159.9 million with
operating margin declining to 11.8% from 12.8% a year ago.
Sales in the High Performance Metals segment climbed 14% year over
year to $566.2 million, buoyed by higher demand from commercial
aerospace market and contributions from ATI Ladish acquisition.
Shipments of nickel-based and specialty alloys jumped 12% while
titanium and titanium alloys mill products shipments fell 10%.
Flat-Rolled Products segment revenues dipped 9.6% to $657.4 million
on account of reduced raw material surcharges. Shipments of
high-value products remained flat compared with the year-ago
quarter, while those of standard stainless products (sheet and
plate) increased 23%.
Sales in the Engineered Products division rose 5.3% to $133.8
million, driven by higher demand for tungsten-based products and
carbon alloy steel forgings. The company witnessed healthy demand
from the oil and gas, cutting tool, transportation, construction
and mining and aerospace end markets.
Allegheny ended the quarter with cash and cash equivalents of
$210.3 million, down 43% year over year. Net debt as a percentage
of total capitalization was 33.4% at the end of the quarter
compared with 32.3% a year ago. Total debt to total capital was
36.8% as of June 30, 2012, compared with 38% as of June 30, 2011.
Factoring in the current macroeconomic scenario, Allegheny now
expects revenues to be in the band of $5.3 billion to $5.4 billion
for 2012. Segment operating margin is now expected to be similar to
that achieved in the first half. Earlier, the company expected
revenue growth to be at least 10% year over year and segment
operating profit in the range of 13% to 14% of sales in 2012.
Allegheny anticipates its third quarter sales and volume to be
impacted by seasonal slowdowns. Nevertheless, the company expects
to continue to benefit from its new alloys and products,
diversified global growth markets and differentiated product mix.
It envisions strong growth in its key end markets including
aerospace, oil and gas and electrical energy. Allegheny sees
roughly $2 billion in potential annual sales from its new
manufacturing capabilities and new products over the next five
Allegheny also said that shipments for its upcoming large projects
in the oil and gas/chemical process industry market, including
desalination, will begin in the fourth quarter of 2012.
Allegheny, which competes with
Carpenter Technology Corp.
), currently retains a Zacks #5 Rank, reflecting a short-term (1 to
3 months) Strong Sell rating. We have a long-term (more than 6
months) Underpeform recommendation on the stock.