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Allegheny Faces Flat-Rolled Weakness, Pricing Headwinds

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On Nov 13, we issued an updated research report on Allegheny TechnologiesATI .

Allegheny posted a loss in third-quarter 2015, hurt by sustained pressure in its Flat-Rolled Products segment and weak demand from oil and gas markets. Adjusted loss, however, was lower than the Zacks Consensus Estimate. Sales fell year over year, and missed expectations. Allegheny said that it does not expect any significant improvement in its key end markets until 2016.

Allegheny continues to see certain challenges in its core Flat-Rolled Products segment. Revenues from this segment slid roughly 36% year over year in the third quarter, hurt by reduced shipments for almost all products as well as lower base selling prices and raw material surcharges for standard products and most high-value products.

The Flat-Rolled Products division also swung to an operating loss in the quarter, hit by lower base-selling prices and falling raw material surcharges. The temporary impacts of shutdown and restart of operations following the mid-quarter lockout of United Steelworkers (USW)-represented workers also weighed on the segment's results.

Weak demand and increased Asian imports are putting pressure on stainless steel sheet plate prices. Imports of cold rolled stainless sheet and strip from China surged 115% in 2014 and the trend continues in 2015. Demand for flat-rolled products in industrial markets also remains somewhat weak.

In addition, results from Allegheny's High Performance Metals and Components segment remain affected by low operating rates at its Rowley titanium sponge facility and its move to use company-produced titanium sponge in place of lower cost titanium units to make certain titanium products.

Lower oil prices have also created an uncertain demand environment for the company's products in drilling applications in the oil and gas industry (10% of total sales in 2014). Demand from the oil and gas market is expected to remain weak through 2015.

Allegheny currently sports a Zacks Rank #4 (Sell).

Stocks to Consider

Better-ranked companies in the steel and metals space include NSK Ltd. NPSKY , Worthington Industries, Inc. WOR and Norsk Hydro ASA NHYDY . While NSK holds a Zacks Rank #1 (Strong Buy), both Worthington and Norsk Hydro carry a Zacks Rank #2 (Buy).

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WORTHINGTON IND (WOR): Free Stock Analysis Report

ALLEGHENY TECH (ATI): Free Stock Analysis Report

NSK LTD -UN ADR (NPSKY): Free Stock Analysis Report

NORSK HYDRO ADR (NHYDY): 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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