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On Wednesday, KeyBanc Capital Markets analyst Philip Gibbs upgraded shares of Allegheny Technologies Incorporated (NYSE: NYSE:ATI) from Sector Weight to Overweight, setting a price target of $55.00. Currently trading at $45.61, ATI maintains a "GOOD" financial health score according to InvestingPro analysis. Gibbs highlighted several factors that could influence the company’s performance, including the potential impact of tariffs and slower sales of airframe titanium. However, he pointed out that any negative effects of tariffs would likely not emerge until later in the year.
Furthermore, Gibbs noted that Allegheny Technologies is expected to deliver stronger operational performance following issues in the second half of 2024, particularly in its jet engine billet and forgings operations. With analyst targets ranging from $62 to $81 and a strong consensus recommendation, the company’s outlook appears promising. He also mentioned a conservative estimate for engine after-market growth at 6% year-over-year, compared to industry expectations that range from 15% to 35%.
The analyst’s outlook remains unchanged for the company’s fiscal year 2025 earnings, maintaining the existing guidance range of $2.80 to $3.00. He also addressed the recent United Steelworkers (USW) contract negotiations, stating that they are not anticipated to significantly affect Allegheny’s 2025 outlook, as there were no formal work stoppages.
Gibbs further compared Allegheny’s valuation to its peers, noting that the company’s shares are trading at approximately 9.5 times enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) based on his 2025 estimates. Current InvestingPro data shows an EV/EBITDA of 11.6x, with a P/E ratio of 16.16x and strong liquidity indicated by a current ratio of 2.44. This valuation is below the expected range of 10 to 12 times and notably less than that of peers Carpenter Technology Corporation (NYSE:CRS) and Hexcel Corporation (NYSE:HXL), which trade at around 13 times EV/EBITDA. Want deeper insights? InvestingPro subscribers get access to 6 additional exclusive ProTips about ATI, including management’s aggressive share buyback strategy and the company’s impressive five-year returns.
The positive assessment from KeyBanc comes as Allegheny Technologies continues to navigate the current market landscape, with the analyst suggesting that the company’s stock is undervalued compared to its closest competitors. This assessment aligns with InvestingPro’s Fair Value analysis, which indicates the stock is currently trading near its Fair Value.
In other recent news, Allegheny Technologies Incorporated reported fourth-quarter earnings that exceeded expectations, with adjusted earnings per share of $0.79, surpassing the consensus estimate of $0.61. The company’s revenue increased by 10% year-over-year to $1.17 billion, exceeding the anticipated $1.1 billion. This strong performance was largely driven by the aerospace and defense sectors, which accounted for 65% of the company’s sales during the quarter. Looking ahead, ATI provided an optimistic outlook for 2025, forecasting full-year adjusted earnings of $2.80 to $3.00 per share, well above the analyst consensus of $2.27.
In terms of analyst activity, Benchmark maintained its Buy rating on ATI, raising the price target to $81, citing benefits from a tight nickel alloy product market and record MRO backlogs. CFRA also raised its 12-month price target for ATI to $75 while maintaining a Buy rating, following ATI’s strong fourth-quarter performance. The company has also faced mixed outcomes in labor agreement votes, successfully securing a new agreement at its Albany, Oregon facility, while negotiations continue in Pennsylvania and New York.
ATI has narrowed its fiscal year 2025 EBITDA guidance to a range of $800 million to $840 million, reflecting a slight adjustment from previous estimates. The company’s titanium melt capacity has expanded by 80% over the past two years, capitalizing on the diversification of customers away from Russian suppliers. Benchmark analysts positioned their expectations at the midpoint of ATI’s first-quarter guidance, with an adjusted EPS target of $0.58, slightly below the consensus estimate of $0.60. As negotiations proceed and market conditions evolve, stakeholders will be closely monitoring these developments.
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