We are maintaining our Underperform recommendation on
) following its lackluster second quarter results. Earnings of 50
cents a share missed the Zacks Consensus Estimate of 54 cents.
Revenues rose modestly to $1,357.4 million, also falling behind the
Zacks Consensus Estimate of $1,371 million.
The Pennsylvania-based company saw a roughly 12% decline in its
profit as sluggish growth across the U.S. and China, along with
fragile economic conditions in Europe, hurt the demand for its
products in the quarter.
Allegheny anticipates its third quarter sales and volume to be
impacted by seasonal slowdowns. Nevertheless, it envisions strong
growth in its key end markets including aerospace, oil and gas and
Allegheny, which competes with
Carpenter Technology Corp.
) among others, is one of the world's largest and most diverse
specialty metals companies. It is a significant supplier to
commercial aircraft engine manufacturers and is also expanding its
footprint in the commercial airframes market.
Allegheny is expected to benefit from its new alloys and products,
diversified global growth markets, differentiated product mix and
healthy demand across aerospace, oil, electrical energy,
gas/chemical process and medical industries.
However, the company is contending with a soft economy and raw
material cost pressures. Moreover, reduced raw material surcharges
and low base prices of standard stainless products are affecting
the results of its key Flat-Rolled Products division. Revenues from
this segment sagged nearly 10% in the second quarter.
Demand for the company's standard stainless products has been hurt
by rapidly falling raw material surcharges, resulting in customers
delaying purchases. In addition, the same factors appear to be
influencing short-term demand for some high-value products from
some key end-markets as many customers are being cautious and
keeping inventories lean.
Moreover, the soft U.S. and European economies remain as overhangs.
The company expects its revenues and earnings to decline in the
third quarter given the macroeconomic headwinds.
Our recommendation on Allegheny is supported by a short-term Zacks
#5 Rank (Strong Sell).
ALLEGHENY TECH (ATI): Free Stock Analysis
CARPENTER TECH (CRS): Free Stock Analysis
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