Allegheny (ATI) Gets $45M Contract for Oil Pipeline Project

Allegheny Technologies Incorporated ATI recently announced that it has been chosen to supply nickel-based flat rolled products (“FRP”) for a large oil pipeline project in South America. The company’s differentiated products are expected to facilitate increased energy production in the region.

The company expects the supply contract to add roughly $45 million revenues in its FRP segment, with shipments expected to start in the second quarter of 2019 and complete by the end of 2019. Notably, the FRP unit’s revenues rose 13% year over year to $441.8 million in fourth-quarter 2018.

The company offers a highly competitive solution through differentiated continuous coil instead of discrete plate for this application. The Hot-Rolling and Processing Facility (“HRPF”) provides unparalleled reduction power and gauge control. It also enables the output of materials with proven corrosion resistance in the demanding subsea oil production environment. 

Allegheny is a global producer of technically advanced specialty materials and complex components.

The company’s largest serving markets include aerospace & defense, mainly jet engines. It also has a strong presence in the electrical energy, oil & gas, automotive, medical and other industrial markets. It is a market leader in manufacturing differentiated specialty alloys and forgings. The company is also a pioneer in the production of powders used in next-generation jet engine forgings and 3D-printed aerospace products.

Shares of Allegheny have gained 9.4% in the past year compared with the industry’s 6.9 rise%.

In January 2019, the company said that it expects year-over-year growth in operating margin and revenues at the HPMC division in 2019 through focused growth in highly-differentiated materials and technologies, mainly for the jet engine market. The company targets high-single-digit revenue growth and segment operating profit margin improvement of 150 basis points year over year in 2019 including the unfavorable impact of higher retirement benefit expense of around $8 million.

At the FRP segment, the company expects significant price declines in several key raw materials, which may hurt its first-quarter 2019 results due to the mismatch between input costs and the surcharge index pricing mechanism.

Allegheny envisions results for the FRP segment for full-year 2019 to be in line with 2018. Continued benefits from higher HRPF utilization rates and sales growth of high-value products are forecast to be offset by the short-term raw material costs headwinds and higher retirement benefit expense (of around $23 million) in the segment.

Allegheny Technologies Incorporated Price and Consensus

Allegheny Technologies Incorporated Price and Consensus | Allegheny Technologies Incorporated Quote

Zacks Rank & Key Picks

Allegheny currently carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the basic materials space are Kirkland Lake Gold Ltd. KL, Ingevity Corporation NGVT and Materion Corporation MTRN, all currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kirkland has an expected earnings growth rate of 8.8% for 2019. The company’s shares have surged 94.8% in the past year.

Ingevity has an expected earnings growth rate of 17.9% for the current year. The company’s shares have rallied 47.7% in a year’s time.

Materion has an expected earnings growth rate of 12.6% for 2019. Its shares have gained 12.5% in a year’s time.

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