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Allegheny Misses, Focusing on Cost Cuts - Analyst Blog
7/24/2013 5:17:00 PM
Allegheny Technologies Inc. ( ATI ) reported second-quarter 2013 earnings of 4 cents per share, down from 50 cents recorded a year ago. The results missed the Zacks Consensus Estimate of 10 cents. Profit plummeted 92 % year over year to $4.4 million on lower sales.
Revenues slipped 16% year over year to $1,135.5 million,
missing the Zacks Consensus Estimate of $1,214 million. Revenues
were hurt by lower demand across several end markets including
oil and gas, jet engine aftermarket, electrical energy, and
construction and mining. Allegheny also witnessed lower pricing
for many of its products and a decline in raw materials
Sales in the Engineered Products division tumbled 26% to $98.8 million, hurt by weak demand for tungsten-based products and carbon alloy steel forgings. The company witnessed marginal improvements in the demand for oil and gas and aerospace markets construction and mining versus the previous quarter, but was lower from the construction and mining and transportation markets.
Allegheny, which is among the prominent players in the U.S. specialty steel industry along with Carpenter Technology ( CRS ), and Precision Castparts ( PCP ), expects business conditions to remain challenging through second-half 2013 due to persistent global economic uncertainties, short lead time and volatile raw material prices.
Allegheny expects the third quarter to be the softest in many of its end markets. However, the company remains encouraged by stabilization in nickel and titanium scrap prices and anticipates that, if this trend continues, the fourth quarter will witness improvement in demand and stabilization of selling prices.
Allegheny is primarily focusing on cost optimization and is accelerating its cost reduction efforts. Allegheny, through this move, was successful in gross cost reductions of more than $79 million in during the first six months of 2013, a pace which is well ahead its 2013 target of $100 million in new cost reductions.
The cost reductions are expected to reap benefits for Allegheny in 2013 and beyond. The company also aims to reduce its managed working capital by implanting lean initiatives to improve inventory turns.
Allegheny currently retains a Zacks Rank #5 (Strong Sell). Another company in the specialty steel industry, RTI International Metals Inc. ( RTI ), maintains a Zacks Rank #1 (Strong Buy).
ALLEGHENY TECH (ATI): Free Stock Analysis Report
CARPENTER TECH (CRS): Free Stock Analysis Report
PRECISION CASTP (PCP): Free Stock Analysis Report
RTI INTL METALS (RTI): Free Stock Analysis Report
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