Recent Posts

Specialty Materials: A Tale Of Two Alloys – A Review Of Quarterly Survey Results And Market Trends

We collected several data points throughout the specialty materials survey process but could not confidently identify a main theme for this update report. Channel crosscurrents, a less-aggressive aerospace outlook, and modest erosion in contact sentiment could be interpreted as mixed-to-negative indicators for the entire peer group heading into the 4Q earnings period. We are not expecting many companies within our coverage universe to meet/beat near-term expectations, but there are still a few names worth holding through any period of market turbulence, including the upstream alloy producers that appear to be positioned to take market share in CY22. Continue reading

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4:37 AM

Aero Suppliers: The Global Supply Chain Could Be Facing More Bad 787 News

Indications from our latest aerospace channel checks suggests additional downside risk for global suppliers levered to the B787 aircraft program. Industry contacts now report growing demand headwinds associated with extended Dreamliner assembly lines halts and have started to reset 1H22 top-line expectations due to a slower-than-expected production recovery. This morning, we lowered estimates for the main companies in our coverage group to align with more conservative B787 build rate assumptions for CY22.formal issuance of strong LEAP jet engine production guidance. Both items should be considered bullish data points for the specialty materials and upstream aero supply peer groups, and the main drivers behind accelerated top-line growth and strong earnings contribution over the next 2-3 years. Continue reading

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9:57 AM

Haynes International (HAYN): Strong FY4Q Results Confirm Early Corporate Strategy Benefits

The FY4Q beat, favorable top-line and earnings guidance, and general commentary offered by the Haynes International (HAYN) management team during the recent investor call reaffirms our bullish view on the shares. We believe the portfolio is uniquely positioned to capture strong earnings growth over the next two years, driven by underlying end-market demand strength, enhanced market positioning, a much lower mill operating cost position, and limited premium melt supply. Today, we raised our earnings estimates which ultimately led to a revised twelve-month target price of $49/share (up from $45). Continue reading

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12:35 PM

Aerospace: Updating Our Macro Assumptions Ahead Of New Industry Catalysts

After taking a closer look at aerospace market drivers, listening to the commentary provided by OEMs and Tier-1 suppliers, and collecting early market intel from proprietary survey-work, we remain comfortable with the bullish outlook applied the coverage group. We anticipate the realization of accelerated aero-related sales growth in CY22 for companies levered to aluminum, composite materials, specialty materials, and forging services driven by unit volume strength, better pricing/mix, and distribution channel refill. In today’ s market update, We lowered the CY22 earnings outlook for Hexcel (HXL) to account lost 787 revenues in 1H22. Continue reading

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5:39 AM

Aerospace: Upgrading Upstream Suppliers On Stronger Aero Sales Outlook And Potential Bottleneck Benefits

We are making a rotational call within the aerospace coverage group, now favoring upstream suppliers that appear to be positioned to benefit from a changing commercial aircraft production environment. The investor narrative may shift to the premium forgers and/or specialty materials providers earlier-than-expected as the supply chain readies for a sharp inflection in demand for 737MAX or A320neo applications, looking beyond negative near-term earnings expectations. As such, we are changing ratings on a few companies that fit into that description. Today, we are formally upgrading Hexcel Corporation (HXL) and Haynes International (HAYN) to Strong Buy investment ratings and moving Allegheny Technologies (ATI) over to Outperform. We had previously rated all three Hold. Continue reading

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8:28 AM

Aerospace: Suppliers Are Reacting To The New LEAP Production Targets

General Electric (GE) held a conference call with its major suppliers to review all details behind the newly implemented LEAP production schedule and to ensure supply chain alertness. Last week, the company effectively raised the CY22 production outlook to 360-370 engines to account for stronger single-aisle aircraft build rates. This was the third major scheduling adjustment announced by the aircraft OEMs and jet engine suppliers, which suggests an upward bias to CY22-23 expectations for the coverage group. Continue reading

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6:53 AM

Specialty Materials: Increasing Estimates On The Premium Alloy Suppliers Levered To Jet Engine

Positive data points and contact commentary collected during quarterly checks on the specialty materials group serves as the key catalyst behind the upward estimate revisions we applied to certain names within our coverage universe. Today, we raised estimates on Allegheny Tech (ATI) and Haynes International (HAYN) to reflect the upward bias associated with enhanced aerospace and turbine sales exposure. Continue reading

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10:31 AM

Haynes International (HAYN): Another Weak Report But An Inflection Point May Finally Be On The Radar (Recap)

The HAYN management team is echoing a similar sentiment as most of its direct competitors: While most of the operating results reported this month have been underwhelming and CY21 earnings expectations are generally subdued, the specialty materials peer group seems to be approaching a point of stabilization. Companies levered to the premium alloys expect an inflection point to develop within the next 2-3 quarters with the titanium turn seen lagging by 1-2 quarters. Continue reading

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8:30 AM

Haynes International (HAYN): We Are Not Ready To Clear The Shares For Takeoff; Initiating Coverage With A HOLD

Today, we are formally initiating coverage on Haynes International (HAYN) with a HOLD rating. While we certainly understand the initial exuberance around the aerospace suppliers and specialty materials peer group, following Monday’s vaccination news, we caution investors that underlying fundamentals are still quite weak. We prefer to wait for evidence of better titanium and nickel-based alloy trends before turning more constructive on this company or the peer group. Continue reading

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8:37 AM
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