Why Is Allegheny Technologies (ATI) Down 12% Since Last Earnings Report?

A month has gone by since the last earnings report for Allegheny Technologies (ATI). Shares have lost about 12% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Allegheny Technologies due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Allegheny's Earnings and Revenues Beat Estimates in Q4

Allegheny recorded net income of $56.5 million or 41 cents per share in fourth-quarter 2019, up from a profit of $41.1 million or 30 cents per share in the prior-year quarter.

Excluding one-time items, adjusted earnings per share were 36 cents that beat the Zacks Consensus Estimate of 32 cents.

The company delivered revenues of $1,018.6 million in the quarter, down 1.9% year over year. Nevertheless, the figure surpassed the Zacks Consensus Estimate of $990.5 million.

FY19 Results

In 2019, the company registered a profit of $257.6 million or $1.85 per share, up from $222.4 million or $1.61 a year ago.

Revenues rose 1.9% year over year to $4,122.5 million in 2019.

Segment Highlights

In the fourth quarter, revenues in the HPMC segment inched up 1.1% year over year to $602.8 million. The company noted that 77% of unit sales were attributable to the aerospace and defense markets. Also, sales of next-generation jet engine products contributed 53% to total HPMC jet engine product sales. Operating profit in the unit rose 22.1% year over year to $92.8 million. Margins benefitted from higher aerospace and defense markets sales as well as normal business seasonal patterns.

The FRP segment’s sales fell 5.9% year over year to $415.8 million. Per the company, lower demand for oil & gas related products as well as the automotive and general industrial markets impacted the unit’s sales. Operating profit in the division totaled $12.5 million, which rose 10.6% year over year.

Financial Position

Allegheny ended 2019 with cash and cash equivalents of $490.8 million, up 28.5% year over year. Long-term debt fell 9.6% year over year at $1,387.4 million.

Cash from operating activities were $230.1 million for 2019, down 41.4% year over year.

Outlook

Going forward, the company expects first-quarter 2020 earnings to increase on a year-over-year basis despite challenges in the aerospace industry. The company is proactively managing its cost structure to minimize the negative financial impacts from the stoppage of 737 MAX production.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.