Allegheny Technologies (NYSE: ATI) reported Q4 EPS of $0.30, $0.04 worse than the analyst estimate of $0.34. Revenue for the quarter came in at $1.04 billion versus the consensus estimate of $992.43 million.

Fourth Quarter 2018 Results

• Sales were $1.04 billion, 14% higher than Q4 2017
  • HPMC segment sales of $596 million, up 15% versus Q4 2017
  • FRP segment sales of $442 million, up 13% versus Q4 2017
• Business segment operating profit was $87 million, or 8.4% of sales
  • HPMC segment operating profit was $76 million, or 12.7% of sales
  • FRP segment operating profit was $11 million, or 2.6% of sales
• Net income attributable to ATI was $41.1 million, or $0.30 per share

“We delivered our highest revenues since 2014,” said President and CEO Bob Wetherbee. “Revenues grew in nearly all of our major markets, a testament to our ability to meet customers’ increasing demand for ATI’s unique design and production capabilities. Our commitment to relentless innovation and disciplined operational performance led both of our business segments to achieve double-digit sales growth in aerospace and defense.”

“Our HPMC segment finished the year with solid fundamentals as sales increased 15% in the fourth quarter and 13% for the full year compared to the prior year periods. These results exceeded the upper-end of our full year revenue growth guidance range of 10% to 12%,” said Wetherbee. Full year segment operating profit of $335 million, or 14.4% of sales, represented a 250-basis point improvement over 2017. Sales to the aerospace and defense markets grew by 15% versus the prior year quarter and were 77% of total HPMC fourth quarter 2018 sales. Next-generation jet engine product sales growth remained strong, increasing by over 50% versus the fourth quarter 2017, and represented 48% of total fourth quarter 2018 HPMC jet engine product sales. Fourth quarter 2018 HPMC segment operating profit was $76 million, or 12.7% of sales. Q4 results reflect higher operating costs (approximately $7 million) including major maintenance activities, which will enable continued strong operational execution into 2019, as well as ongoing impacts of a previously identified nickel powder billet supply issue and higher energy costs at our facilities in the Pacific Northwest due to supply disruptions following a natural gas pipeline explosion. “While we finished the year slightly below our increased HPMC operating profit margin expectations, I am proud of our teams’ efforts to satisfy our customers’ increased demand levels while performing important maintenance activities that help to position us for future profitable growth,” said Wetherbee.

The FRP segment reported fourth quarter 2018 sales of $442 million and operating profit of $11 million, or 2.6% of sales. FRP’s U.S. operations remained profitable in the fourth quarter 2018 despite the predicted significant declines in prices for several key raw materials, which reduced profit margins due to a mismatch between higher input costs for these materials and raw material surcharges based on falling raw material indices that are included in selling prices. “These results demonstrate the benefits of improved product mix and our business transformation efforts,” said Wetherbee. FRP segment results in the fourth quarter 2018 include a $4 million loss for ATI’s share of the A&T Stainless joint venture operations, which is currently unable to fully overcome the negative impact of the Section 232 import tariffs. For the full year 2018, FRP segment operating profit was $78 million, more than double the 2017 result, with significant growth in key end markets. 2018 sales to the differentiated oil & gas and aerospace & defense markets were each up approximately 30% versus the prior year.

“Within the FRP segment, we continue to make progress toward our goal of increasing asset utilization in a capital-efficient manner. Carbon steel hot-rolling conversion services for NLMK USA continue to ramp-up at our world-class Hot Rolling and Processing Facility, or HRPF. We expect ongoing production increases in line with expectations in 2019,” Wetherbee said. “Regarding our efforts to secure a Section 232 tariff exclusion on behalf of the A&T Stainless JV, we continue to engage the U.S. Commerce Department in dialogue and work within their tariff exclusion framework. We firmly believe the facts underlying this request are compelling and justify a tariff exclusion,” said Wetherbee

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