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Allegheny Technologies (ATI) Tops Q3 EPS by 4c

October 21, 2014 7:18 AM EDT

Allegheny Technologies (NYSE: ATI) reported breakeven Q3 loss, $0.04 better than the analyst estimate of ($0.04). Revenue for the quarter came in at $1.07 billion versus the consensus estimate of $1.12 billion.

“We continued to build the foundation for profitable growth in the third quarter 2014 and we are beginning to see the benefits of ATI’s transformation, capital investments, acquisitions, and technology innovations,” said Rich Harshman, Chairman, President and Chief Executive Officer. “Segment operating profit improved and ATI achieved breakeven results from continuing operations, including commissioning and qualification costs associated with our strategic capital growth projects. Segment operating profit improved to $70.6 million, or 6.6% of sales, an 8% increase compared to the second quarter 2014.

“During the third quarter, ATI successfully reached a number of strategic long-term agreements (LTAs) that secure significant growth on next-generation and legacy single-aisle airplanes. In summary, we enhanced our position as a leading supplier of premium-quality nickel-based alloy and titanium-alloy billet; we significantly increased our closed-die forgings content; and we increased ATI’s titanium investment casting content. In addition, we have existing agreements for differentiated alloys, such as Rene 65 alloy and ATI 718Plus® alloy, as well as other unique and difficult-to-produce products. These new agreements are enabled by the capital investments, acquisitions, and technology innovations we have made during the past several years.

“We also booked orders for a large oil & gas project that will use our nickel-based alloy plate. We received a large share of this project due to the quality of our nickel-based alloy plate that is enabled by the 2008 upgrade of our plate mill. Shipments are scheduled to begin in late Q4 and are expected to continue through the first quarter of 2015.”

rategy and Outlook

“The drivers of several of our secular growth markets, particularly aerospace, oil & gas, and medical, remain intact. Aerospace build rate projections are increasing and next-generation airplanes and the jet engines that power them begin an unprecedented ramp up phase beginning in 2015,” said Rich Harshman. “Oil & gas projects that are being constructed are expected to take several years to complete. Demand from the medical market for our products used in prostheses and MRI machines remains strong. Automotive build rates in North America also remain strong. In short cycle markets, we are seeing a lot of global uncertainty and expect to see cautious inventory management in the short term, particularly until the price of nickel stabilizes and U.S. and other global economic outlooks become more clear.

“As we accelerate the commissioning of lighter gauge coiled products during the fourth quarter 2014, we expect HRPF pre-tax start-up costs of approximately $10 million in the quarter. As a result, we now expect HRPF start-up costs to be in the low end of our original $30 to $35 million projected range.

“We expect that the fourth quarter 2014 will be impacted by approximately $7 million of costs as we continue the Rowley titanium sponge PQ program. In addition, based on current year-end forecasted raw material costs, we expect net LIFO inventory valuation reserve charges of approximately $16 million, pre-tax, in the fourth quarter, compared to $10 million in the third quarter 2014.”

For earnings history and earnings-related data on Allegheny Technologies (ATI) click here.



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