On Friday, B.Riley revised its outlook for Atkore International Group Inc . (NYSE: NYSE:ATKR), downgrading the stock from Buy to Neutral and significantly reducing the price target from $135.00 to $84.00. This adjustment followed the company's announcement of fourth-quarter fiscal year 2024 results and future guidance that did not meet the firm's expectations.
Atkore, a manufacturer of electrical products and metal framing solutions, reported mixed results for the fourth quarter of 2024 on Thursday, November 21, 2024. The company's financial performance and its guidance for the first quarter of fiscal year 2025 and the full fiscal year were below the estimates provided by B.Riley due to a broader deterioration in pricing.
The firm has lowered its estimates for Atkore based on several factors impacting the industry. A primary concern highlighted was the uncertainty surrounding new capacity entering the market and the potential risks this poses to pricing structures. Additional worries include competition from steel product imports and persistent pricing pressures that may not ease until tariffs are implemented. While the exact timing and details of such tariffs are still unknown, they could play a significant role in the company's future pricing power.
Despite these challenges, B.Riley noted that Atkore's financial results and stock price could be approaching a low point. Nonetheless, the downgrade reflects a cautious stance due to the anticipated 6- to 9-month pricing headwinds, especially as the company heads into what is traditionally a slower period for the industry.
In other recent news, Atkore International Group Inc. reported a mixed financial performance for Q4 of FY2024, with net sales reaching $3.2 billion, adjusted earnings per share at $14.48, and adjusted EBITDA of $772 million.
Despite pricing pressures in the PVC and steel conduit markets, the company has initiated growth strategies, emphasizing their commitment to shareholder returns. For FY2025, Atkore anticipates net sales between $2.9 billion and $3.2 billion, with adjusted EBITDA projected to be between $475 million and $525 million.
The company's strategic growth areas include solar torque tubes, water-related products, global mega projects, and regional service centers. Atkore has also repurchased over $1.3 billion in stock and introduced a quarterly cash dividend.
The company faces challenges such as decreased average selling prices and increased competition, particularly in the PVC markets. However, Atkore is investing in productivity initiatives and is optimistic about future growth and efficiency, as expressed by President and CEO Bill Waltz and CFO John Deitzer.
InvestingPro Insights
To provide additional context to B.Riley's downgrade of Atkore International Group Inc. (NYSE: ATKR), let's examine some key financial metrics and insights from InvestingPro.
According to InvestingPro data, Atkore's P/E ratio stands at 6.63, indicating that the stock is trading at a relatively low earnings multiple. This aligns with one of the InvestingPro Tips, which suggests that the company is "Trading at a low earnings multiple." This valuation could be reflecting the market's concerns about the industry challenges mentioned in the article.
Another relevant InvestingPro Tip notes that "Analysts anticipate sales decline in the current year." This expectation is consistent with the company's recent guidance and B.Riley's concerns about pricing pressures. The InvestingPro data shows a revenue decline of 10.72% over the last twelve months, corroborating this outlook.
Despite these challenges, it's worth noting that Atkore remains profitable, with a gross profit margin of 35.43% and an operating income margin of 21.66% over the last twelve months. This profitability, combined with the fact that "Management has been aggressively buying back shares" (another InvestingPro Tip), could potentially provide some support for the stock price.
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for Atkore, providing a deeper understanding of the company's financial health and market position.
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