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Is Allegheny (ATI) Poised for a Beat This Earnings Season?
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Allegheny Technologies Incorporated (ATI - Free Report) is scheduled to release fourth-quarter 2017 results before the market opens on Jan 23.
The company recorded adjusted loss of 7 cents per share in the previous quarter, which was in line with the Zacks Consensus Estimate. However, revenues increased 12.8% year over year to $869.1 million, surpassing the Zacks Consensus Estimate of $865.1 million.
Alleghany outpaced the Zacks Consensus Estimate in three of the trailing four quarters, with an average positive surprise of 34.4%.
Let’s see how things have shaped up for the forthcoming announcement.
Allegheny Technologies Incorporated Price, Consensus and EPS Surprise
In October, the company said that it expects the High Performance Metals and Components (HPMC) unit to maintain robust performance especially in the commercial aerospace. Also, Alleghany anticipates the unit to deliver improved results in the fourth quarter compared with the preceding quarter.
The Flat-Rolled Products (FRP) unit is likely to benefit from increasing raw material prices in the to-be-reported quarter. The company expects operational improvements and product mix benefits to continue in 2018. Also, it anticipates significant profit improvement opportunities in the same year to be aided by the completion of the start-up and qualification of its new nickel alloys powder facility.
For the fourth quarter, Allegheny’s revenues are expected to be $904.5 million, reflecting an estimated year over year growth of 13.6%.
Allegheny is expected to benefit from improved performance in its HPMC unit. The company witnessed strong sales of jet engine products in the third quarter. The segment’s profits were driven in the quarter by higher productivity from increasing aerospace and defense sales and an improved product mix of next-generation nickel alloys and forgings for the aero engine market. The momentum is expected to continue in the December quarter.
Meanwhile, the company continues to improve its cost structure with its gross cost-reduction initiative. Notably, the Meltless titanium process helps Allegheny reduce the steps in producing titanium alloy powders by directly moving to alloy powders and lower the cost of process. Additionally, the technology utilizes lower cost raw materials and makes it possible to produce novel alloys that cannot be processed using existing technologies.
Allegheny’s shares have soared 65.5% in a year, outperforming the industry’s 44.2% gain.
Earnings Whisper
Our proven model conclusively shows that Allegheny is likely to beat estimates this quarter because it has the right combination of two key ingredients.
Zacks ESP: Allegheny has an Earnings ESP of +11.11%. This is because the Most Accurate estimate is 16 cents while the Zacks Consensus Estimate is pegged at 14 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Allegheny carries a Zacks Rank #3 (Hold), which when combined with a positive ESP, makes us confident of an earnings beat. Note that stocks with — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 — have significantly higher chance of beating earnings estimates.
Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.
Stocks With Favorable Combination
Here are some companies in the basic materials space, which according to our model also have the right combination of elements to post earnings beat this quarter:
Iamgold Corporation (IAG - Free Report) has an Earnings ESP of +28.57% and a Zacks Rank #1.
LyondellBasell Industries NV (LYB - Free Report) has an Earnings ESP of +0.55% and a Zacks Rank #2.
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Image: Bigstock
Is Allegheny (ATI) Poised for a Beat This Earnings Season?
Allegheny Technologies Incorporated Price, Consensus and EPS Surprise | Allegheny Technologies Incorporated Quote
Factors at Play
In October, the company said that it expects the High Performance Metals and Components (HPMC) unit to maintain robust performance especially in the commercial aerospace. Also, Alleghany anticipates the unit to deliver improved results in the fourth quarter compared with the preceding quarter.
The Flat-Rolled Products (FRP) unit is likely to benefit from increasing raw material prices in the to-be-reported quarter. The company expects operational improvements and product mix benefits to continue in 2018. Also, it anticipates significant profit improvement opportunities in the same year to be aided by the completion of the start-up and qualification of its new nickel alloys powder facility.
For the fourth quarter, Allegheny’s revenues are expected to be $904.5 million, reflecting an estimated year over year growth of 13.6%.
Allegheny is expected to benefit from improved performance in its HPMC unit. The company witnessed strong sales of jet engine products in the third quarter. The segment’s profits were driven in the quarter by higher productivity from increasing aerospace and defense sales and an improved product mix of next-generation nickel alloys and forgings for the aero engine market. The momentum is expected to continue in the December quarter.
Meanwhile, the company continues to improve its cost structure with its gross cost-reduction initiative. Notably, the Meltless titanium process helps Allegheny reduce the steps in producing titanium alloy powders by directly moving to alloy powders and lower the cost of process. Additionally, the technology utilizes lower cost raw materials and makes it possible to produce novel alloys that cannot be processed using existing technologies.
Allegheny’s shares have soared 65.5% in a year, outperforming the industry’s 44.2% gain.
Earnings Whisper