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Allegheny (ATI) Q4 Loss Lower than Expected, Revenues Miss

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Allegheny Technologies Inc. ATI reported an adjusted loss of 4 cents per share in fourth-quarter 2016, narrower than the Zacks Consensus Estimate of a loss of 11 cents.

The results exclude pre-tax restructuring charges of $29 million, including charges of $13 million related to closure related actions at the High Performance Materials & Components (HPMC) segment, and charges of $16 million for closure related actions at the Flat Rolled Products (FRP) segment.

Including one-time items, the company reported a net earnings (attributable to Allegheny) of $10 million or 9 cents per share for the quarter compared with the year-ago loss of $226.9 million or $2.12 per share.

Revenues for the fourth quarter rose 7.7% year over year to $796.1 million, but missed the Zacks Consensus Estimate of $817 million. The top line increased 3.3% from the sequentially prior quarter.

Allegheny Technologies Incorporated Price, Consensus and EPS Surprise

Allegheny Technologies Incorporated Price, Consensus and EPS Surprise | Allegheny Technologies Incorporated Quote

Segment Highlights

Revenues from the HPMC segment improved 4% year over year to $477.2 million in the fourth quarter mainly due to increased sales of nickel-based and specialty stainless alloys as well as forged and cast components. Operating profit increased to $53.8 million from $21 million in the prior-year quarter. The segments profits have improved for six consecutive quarters, reflecting the impact of restructuring activities, including the idling of the titanium sponge plant at Rowley.

The FRP segment's sales rose 13% year over year to $318.9 million, supported by improving market conditions from the exceptionally weak conditions in the prior-year quarter.

Segment operating loss was $0.8 million compared with an operating loss of $120.1 million in the year-ago quarter. The segment's losses narrowed due to better average selling prices as well as benefits from improving operating performance.

Financial Position

Allegheny's cash in hand as of Dec 31, 2016 was $229.6 million, up 53.3% year over year. Long-term debt increased 18.8% to $1,771.9 million.

Cash used by operations for 2016 was $43.7 million. Total debt to total capitalization was 58.3% at the end of the fourth quarter, up from 42% a year ago.

Outlook

Management remains focused on returning the company to sustainable profitable growth with an emphasis on strong balance sheet and cash flow generation. The company has been concentrating on restructuring initiatives for the same.

The HPMC segment's sales are expected to rise roughly 10% and operating profit as a percentage of sales is expected to improve to the low teens in 2017. The company expects the FRP segment to see sequential sales growth in the first two quarters of 2017, but it remains cautious for the second half due to challenging market conditions. The segment is expected to reach a low-single digit operating profit level, as a percentage of sales in 2017.

The company projects capital expenditure of $125 million for full-year 2017. Beyond that capital expenditures are expected not to exceed over $100 million annually for several years.

Allegheny's shares have gained almost 12.4% in the last three months while the Zacks categorized Steel-Speciality industry has gained about 6.8% over the same period.

Zacks Rank

Allegheny currently carries a Zacks Rank #3 (Hold).

Some better-ranked companies in the steel space include United States Steel Corp. X , AK Steel Holding Corp. AKS and POSCO PKX , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

U.S. Steel has an expected long-term growth rate of 8%.

AK Steel has an expected long-term growth rate of 5%.

POSCO has an expected long-term growth rate of 5%.

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Allegheny Technologies Incorporated (ATI): Free Stock Analysis Report

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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.

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