Recent Posts

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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12:18 PM

Allegheny Technologies (ATI): Upgrading The Shares To A Hold As GE Provides Early Jet Engine Supplier Optimism

We are upgrading the shares of Allegheny Technologies (ATI) to a HOLD. After speaking with industry contacts and reviewing aerospace OEM production schedules, we believe earnings estimates are more likely to move higher from the current point. Despite our concerns regarding the extended valuation, we decided to move to a neutral position on the shares as we can no longer identify a “smoking gun” that could push the stock price meaningfully lower. Continue reading

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8:50 AM

Allegheny Technologies (ATI): The Company Closes Out CY20 With A Fourth-Straight Earnings Beat (Recap)

Allegheny Technologies (ATI) reported an adjusted 4Q20 earnings loss of $0.33/share, which exceeded consensus expectations on better-than-expected AAS segment results, stabilized jet engine demand, and portfolio reshaping (Tier4: -$0.40; Street: -$0.36). CEO Bob Wetherbee and his leadership team were highly focused on portfolio optimization and their aggressive efforts started to bear fruit, clearly demonstrated by four consecutive quarterly EPS beats (against the COVID-19 market backdrop). Continue reading

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1:20 PM

Allegheny Technologies (ATI): What Are The Odds The Dreamliner Turns Into A Supplier Nightmare?

We lowered earnings estimates for two of The Boeing Company suppliers potentially over-levered to the Dreamliner program: Allegheny Technologies (ATI) and Hexcel Corporation (HXL). The shares of both companies have traded higher over the past few months, but the valuation looks overextended to us. We remain particularly guarded on the ATI due to the enhanced program leverage. Our UNDERPERFORM rating includes a revised target price of $11/share (up from $8), reflecting about 40% downside versus the Thursday close. Continue reading

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9:52 AM

The Titanium Snapshot – December Update

Feedback coming out of the specialty materials channel supports the bearish call we are making on the global titanium market and selected companies within the specialty materials peer group. Bottomline, raw material providers, mill contacts, metal distributors, fabricators, and premium forgers are all voicing concerns about an extended period of end-demand weakness, a difficult CY21 environment, operating inefficiencies, and destabilized pricing environment.

Names within in our coverage universe with titanium leverage include Allegheny Technologies (ATI), Howmet Aerospace (HWM), Carpenter Technology (CRS) and Haynes International (HAYN). Continue reading

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2:10 PM

Aerospace: The Runway To Recovery Will Be Long And Bumpy For Upstream Suppliers

Consensus estimates still look aggressive, in relation to fundamentals, for aerospace suppliers levered to premium forge, composite materials, metal fabrication, and raw materials. We believe the tier-3/4 peer group may still be 4-5 quarters away from an inflection point, which could be followed by muted demand in CY22 regardless of the COVID-19 vaccination outcome. After updating various industry models, we generated a CY21 baseline growth forecast for upstream aero suppliers at down 12-13% for CY21. We also lowered estimates on Allegheny Tech (ATI) and Hexcel Corp (HXL) this morning, after completing this market analysis and reviewing the negative survey data points referenced in this report. Continue reading

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8:32 AM

Allegheny Technologies (ATI): Initiating Coverage With An UNDERPERFORM Recommendation

We are initiating formal coverage on the shares of Allegheny Technologies (ATI) with an UNDERPERFORM recommendation and twelve-month target price of $8. While we are somewhat intrigued by the long-term value associated with: the calculated portfolio firepower (during periods of cyclical strength); recent market share gains; and the cost reduction measures implemented by the management team, we could not ignore the pronounced weakness in commercial aerospace demand and historically weak survey results in 2H20. Continue reading

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7:00 AM
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