Allegheny Trumps Q3 Earnings Estimates, Lags on Revenues
Allegheny Technologies Inc. (ATI) posted breakeven results from continuing operations in third-quarter 2014 compared with a loss of $28.4 million or 27 cents per share recorded a year ago. Analysts polled by Zacks were expecting a loss of 5 cents per share on an average.
On a consolidated basis, the Pennsylvania-based specialty steel company posted a net loss of $0.7 million or a penny per share in the reported quarter versus a net loss of $33.8 million or 32 cents a share posted a year ago.
Revenues for the third quarter rose 10% year over year to $1,069.6 million, but missed the Zacks Consensus Estimate of $1,146 million. Sales decreased 4% from the sequentially prior quarter due to 1% decrease in sales in the High Performance Materials & Components segment owing to lower shipments of nickel-based alloys which more than offset the increased demand for titanium mill products. Lower shipments for high-value and standard products, and lower selling prices for specific high-value products led to a 7% decrease in sales in the Flat Rolled Products segment.
Operating profits increased more than two-and-a-half-fold year over year to $70.6 million in the quarter and rose 8.3% sequentially. Segment operating profit was negatively impacted by $12.9 million of start-up and qualification costs associated with the HRPF and Rowley titanium sponge facility. The third-quarter results also included $13.1 million in LIFO inventory valuation reserve charges related to the Flat Rolled Products segment and $3.1 million LIFO reserve benefit in the High Performance Materials & Components segment.
Allegheny Technologies Incorporated - Earnings Surprise | FindTheBest
Segment Review
Revenues from the High Performance Metals and Components segment increased 9% year over year to $507.7 million in the quarter due to higher mill product shipments which were partly offset by lower selling prices for most of the products. Sales for nickel-based and specialty alloys were 17% higher, and titanium and titanium-based alloys were 20% higher in the reported quarter. Revenues were affected by 5% lower sales of zirconium and related alloys, and flat forged and cast products sales.
The Flat Rolled Products’ segment sales went up 11% to $561.9 million on account of higher shipments of both high-value and standard products. Shipments of high-value products increased 8% year over year on higher shipments of Precision Rolled Strip products, engineered strip products and nickel-based alloys.
Shipments of standard stainless products increased 3%. Average selling prices rose 17% for standard stainless products and fell 3% for high-value products. The segment benefited from $18.2 million gross cost reductions in the quarter.
Financial Position
Allegheny’s cash and cash equivalents, as of Sep 30, 2014, stood at $264.2 million compared with $537.7 million as of Sep 30, 2013. Long-term debt decreased 2% year over year to $1,509.1 million.
Total debt-to-total capital ratio was 34.7% as of Sep 30, 2014, down from 44.3% as of Sep 30, 2013. Cash used in operations, as of Sep 30, 2014, was essentially unchanged at $0.7 million.
Outlook
Allegheny, which is among the prominent players in the U.S. specialty steel industry, along with Carpenter Technology Corp (CRS), RTI International Metals, Inc. (RTI) and Precision Castparts Corp. (PCP), expects sustainable improvement and demand growth from most of its end markets, particularly aerospace, oil & gas, and medical markets. The company expects improvement in business conditions to continue through the fourth quarter of 2014.
However, the company expects fourth-quarter results to be negatively impacted by start-up and qualification costs related to its two strategic growth projects, HRPF and Rowley. HRPF start-up costs, in the fourth quarter, are expected to be roughly $10 million, pre-tax, as the company speeds up the commissioning process. Allegheny expects HRPF start-up costs to be in the bottom end of its previously forecasted range of $30 million to $35 million. The company also forecasts that the fourth quarter will be impacted by about $7 million of costs as it continues its Rowley titanium sponge facility PQ program.
Based on current year-end projected raw material costs, the company expects net LIFO inventory valuation reserve charges of about $16 million, pre-tax, in the fourth quarter.
Allegheny currently holds a Zacks Rank #3 (Hold).
Read the Full Research Report on ATI
Read the Full Research Report on PCP
Read the Full Research Report on CRS
Read the Full Research Report on RTI
Zacks Investment Research
