Markets
ATI

Allegheny (ATI): What will Q3 Earnings Release Unveil?

An image of some people shaking hands
Credit: Shutterstock photo

Allegheny Technologies Inc.ATI is set to release third-quarter 2015 results before the opening bell on Oct 20.

In the last quarter, the company had delivered a positive earnings surprise of roughly 6.3%. However, sales declined 9% from the sequentially prior quarter due to a sales decline in both the High Performance Materials and Components segment and the Flat Rolled Products segment. Further, sales failed to meet expectations.

Allegheny has delivered an average positive surprise of 32.08% over the trailing four quarters. The Zacks Consensus Estimate for the third quarter is pegged at a loss of 30 cents per share.

Let's see how things are shaping up for this announcement.

Factors to Consider

Allegheny, a diversified specialty materials producer, recently provided a weak third-quarter forecast, stating that it anticipates challenges in its flat rolled products business to persist owing to weaker demand from the oil and gas market.

Also, given the quick fall in present and projected raw materials value, mainly nickel that is almost the lowest in the past 10 years, Allegheny expects a pretax LIFO inventory valuation gain of around $76 million in the third quarter.

The company also anticipates a pretax non-cash charge for Net Realizable Value ("NRV") inventory reserves of $76 million. It further expects a non-cash charge for income tax valuation allowances of around $65 million, net of tax, stemming from a three-year cumulative loss from U.S. operations.

In the quarter to be reported, Allegheny anticipates a net loss attributable to the company, in the range of $142−$148 million, or $1.32−$1.38 per share. Barring the non-cash NRV inventory reserve and income tax valuation charges, the company estimates a net loss in the range of $29−$34 million, or 27−32 cents per share.

The company's Flat Rolled Products segment witnessed continued pressure in the third quarter as its business was affected by weak demand for stainless steel. This was due to surging domestic inventory levels, stemming from low-priced imports in the first half of 2015, mainly from China, together with declining raw materials surcharges. The business also issued a lockout notice at different locations, owing to the lack of progress in existing contract negotiations with the United Steelworkers.

Additionally, Allegheny anticipates continued soft demand from the oil and gas market to adversely impact quarterly results of the High Performance Materials and Components segment. Moreover, weaker seasonal demand, mainly in Europe, coupled with reduced value of raw materials, particularly nickel, resulted in lower third-quarter sales to the aerospace market compared to the year-ago quarter.

Earnings Whispers

Our proven model shows that Allegheny is likely to miss earnings estimates this quarter. This is because the stock has a negative Earnings ESP and a Zacks Rank #5 (Strong Sell).

Zacks ESP: Earnings ESP for Allegheny is currently pegged at -3.33%. This is because the Most Accurate estimate is pegged at a loss of 31 cents while the Zacks Consensus Estimate stands at a loss of 30 cents.

Zacks Rank: Allegheny's Zacks Rank #5, when combined with a negative ESP, indicates an earnings miss. We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some companies in the basic materials sector you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Alamos Gold, Inc. AGI has an Earnings ESP of +33.33% and a Zacks Rank #3 (Hold).

Barrick Gold Corporation ABX has an Earnings ESP of +14.29% and a Zacks Rank #3.

Franco-Nevada Corporation FNV has an Earnings ESP of +7.14% and a Zacks Rank #3.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

ALLEGHENY TECH (ATI): Free Stock Analysis Report

BARRICK GOLD CP (ABX): Free Stock Analysis Report

ALAMOS GOLD INC (AGI): Free Stock Analysis Report

FRANCO NV CP (FNV): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

ATI AGI FNV

Other Topics

Earnings Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More