We are retaining our Neutral recommendation on diversified
specialty materials producer
). Its first-quarter 2012 earnings of 50 cents a share matched the
Zacks Consensus Estimate.
Double-digit growth in sales (up roughly 10% year over year to
$1,352.5 million) was driven by strong a contribution from the
company's Performance Metals segment. However, revenues trailed the
Zacks Consensus Estimate of $1,362 million.
Allegheny still expects revenue growth to be at least 10% year
over year in 2012. The company expects to continue to benefit from
its new alloys and products, diversified global growth markets and
differentiated product mix.
Pennsylvania-based Allegheny is one of the world's largest and
most diverse specialty metals companies. The company's principal
Carpenter Technology Corp.
Allegheny is in the process of finishing several self-funded
capital projects to help augment organic growth and its cost
structure. The company's Rowley titanium sponge facility, which
completed the standard grade qualification program in March 2012,
is making good progress and is expected to produce more sponge at
lesser costs in 2012 compared with 2011.
Allegheny's diversified footprint, focus on growing markets, new
product/technology development initiative and sustained focus on
cost containment strongly place it for future growth. The company
should benefit this year from strong demand across aerospace, oil,
electrical energy, gas/chemical process and medical industries.
Allegheny expects that its upcoming large projects in the oil
and gas/chemical process industry market will commence in
Moreover, Allegheny continues to improve its cost structure with
its gross cost reduction initiative. It expects to realize gross
cost reductions of at least $100 million in 2012.
However, Allegheny is contending with cost-pressures associated
with raw material inflation. Lower volumes and a decline in prices
may also impact the results from the company's core Flat Rolled
Moreover, the soft U.S. and European economies remain as
overhangs and the sustained high unemployment levels may impact
short-term consumer confidence. Our recommendation is in congruence
with a short-term Zacks #3 Rank (Hold).
ALLEGHENY TECH (ATI): Free Stock Analysis
CARPENTER TECH (CRS): Free Stock Analysis
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