Tuesday, KeyBanc has increased its price target on ATI Inc (NYSE: ATI) shares to $66.00 from the previous $58.00, while maintaining an Overweight rating on the stock.
The firm's analyst cited improved earnings projections and strong business performance as the basis for the adjustment. The revised price target comes after an evaluation of ATI's potential for growth in various sectors, including aerospace and defense.
The analyst has updated the earnings per share (EPS) estimates for ATI for the second quarter of 2024 to $0.58, up from $0.54, and for the full year to $2.50 from $2.38.
This adjustment aligns with ATI's own raised guidance, which now ranges from $2.30 to $2.60, up from the previous forecast of $2.12 to $2.52. The forecast for 2025 has also been increased to $3.30 from $3.12.
The revised estimates are based on anticipated stronger pricing and mix gains across ATI's major business segments, bolstered by long-term agreements (LTAs).
ATI is expected to benefit from a multi-year original equipment (OE) ramp-up in aerospace and defense (A&D), unique growth opportunities, and increased business with key industry players such as Airbus and Pratt & Whitney, as well as a robust aftermarket for aerospace components.
KeyBanc's positive outlook also takes into account ATI's strategic positioning to capture more defense contracts and applications in the coming years. The firm notes ATI's recent wins in the titanium market, which serve aerospace, defense, and medical industries, have been facilitated by expanded capacity.
During a visit to ATI's flagship campus in North Carolina in March, KeyBanc observed the company's operational advancements firsthand. ATI has been successful in unlocking capacity in its higher-margin exotic metals business, which serves industries such as nuclear, space, satellite, and semiconductors. Notably, the sales of exotic materials have seen a significant year-over-year increase of 43% in the first quarter of 2024.
InvestingPro Insights
Following KeyBanc's upgraded price target on ATI Inc (NYSE: ATI), recent data and analysis from InvestingPro provide additional context for investors considering the stock. ATI has been demonstrating strong financial performance, with a market capitalization of $7.53 billion and a robust revenue growth of 3.43% over the last twelve months as of Q1 2024. This aligns with KeyBanc's assessment of ATI's growth potential in aerospace and defense sectors. The company's gross profit margin stands at 19.55%, reflecting its ability to maintain profitability amidst its expansion efforts.
InvestingPro Tips highlight that management's aggressive share buyback strategy and the positive revisions by 3 analysts for the upcoming period reinforce the bullish sentiment. Moreover, ATI's strong performance is not going unnoticed, as the stock has been trading near its 52-week high, with a price return of 72.94% over the last year. Additionally, the company's liquid assets exceed short-term obligations, indicating a solid financial position for near-term operations.
For investors seeking more in-depth analysis, InvestingPro offers a wealth of additional tips, including insights into ATI's trading multiples and profitability forecasts. With the use of the coupon code PRONEWS24, investors can receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription, granting access to an extended list of InvestingPro Tips that could further inform investment decisions.
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