On Thursday, KeyBanc Capital Markets adjusted its stance on Allegheny Technologies Incorporated (NYSE:ATI) stock, moving from an "Overweight" rating to a "Sector Weight" position. The revision reflects a tempered outlook on the commercial aerospace sector, where momentum is expected to plateau. The firm has revised its earnings per share (EPS) estimate for the year 2024 to $2.48, a slight decrease from the previous $2.51 forecast, which compares to ATI's own guidance range of $2.30 to $2.60.
The analyst maintained the third quarter 2024 EPS estimate at $0.67 but reduced the fourth quarter projection. For the year 2025, KeyBanc also lowered its EPS expectations from $3.35 to $2.95, citing similar concerns about the commercial aerospace original equipment manufacturers (OEMs) demand. The firm pointed out that while companies like Boeing (NYSE:BA) and Airbus are dealing with production ramp-up issues, there has been a pull from OEMs in structural applications to support supply chain stabilization and prevent future bottlenecks.
KeyBanc's analysis indicated that although structural momentum in the aerospace sector is anticipated to pause, Airbus has announced plans to purchase less titanium in 2025 compared to 2024, while Boeing intends to increase its purchases. In the engine segment, the firm believes that General Electric (NYSE:GE) will likely need to substantially lower its LEAP engine delivery targets for 2025 due to an excess inventory of LEAP 1-B engines, which is attributed to production challenges with Boeing's MAX aircraft.
Despite these near-term challenges, KeyBanc remains optimistic about ATI's prospects over the midterm. The firm expects ATI to benefit from the multiyear ramp-up in OEM aerospace and defense (A&D), unique growth drivers, increased business with Airbus and Pratt & Whitney, and a strong aerospace aftermarket. This balanced view reflects the potential headwinds and tailwinds facing the company in the evolving aerospace industry.
In other recent news, Allegheny Technologies Incorporated (ATI) has been the focus of significant financial developments. Deutsche Bank has increased ATI's price target from $81.00 to $84.00, maintaining a Buy rating on the company's stock. This adjustment comes in anticipation of ATI's upcoming third-quarter earnings per share (EPS) of $0.66. The bank also anticipates a sequential rise in EBITDA due to reduced labor inefficiencies and increased jet engine volume.
ATI has reported a strong financial performance, with its second-quarter revenue reaching nearly $1.1 billion, the highest in a decade. The company's adjusted EPS was $0.60, and adjusted EBITDA was $183 million. Furthermore, ATI has authorized a $700 million stock repurchase program and plans to redeem the remaining $291 million principal amount of its 3.5% Senior Convertible Notes due in September 2024.
In light of these developments, KeyBanc has upgraded ATI's price target, citing the company's connections to the commercial aerospace and defense sectors, new capacity and capabilities, and potential for free cash flow expansion.
InvestingPro Insights
To complement KeyBanc's analysis of Allegheny Technologies Incorporated (NYSE:ATI), recent data from InvestingPro provides additional context to the company's financial performance and market position. ATI's market capitalization stands at $7.82 billion, with a P/E ratio of 20.84, indicating investor confidence in the company's earnings potential despite the challenges in the aerospace sector.
InvestingPro Tips highlight that ATI has been profitable over the last twelve months, with analysts predicting continued profitability this year. This aligns with KeyBanc's EPS estimates, albeit with some downward revisions. The company's strong financial position is further evidenced by liquid assets exceeding short-term obligations, which could provide a buffer against potential industry headwinds.
Notably, ATI has demonstrated impressive market performance, with a 71.89% price total return over the past year and a 27.71% return in the last six months. This robust performance, coupled with the stock trading at 91.21% of its 52-week high, suggests that investors remain optimistic about ATI's prospects, despite KeyBanc's downgrade.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for ATI, providing deeper insights into the company's financial health and market position.
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