By Karl Sinclair
Feb. 4, 2025, © Leeham News: “Expectations were low for ATI after a mix of operational and timing issues weighed on results in 3Q2024,” wrote the aerospace analyst for JP Morgan. “So a solid beat in the quarter and a better than feared guide was enough to drive significant out-performance on the day. While this quarter’s results represent a step in the right direction, we think solid execution on an ascending earnings profile for this year can do more the stock from a valuation perspective and would provide a strong jumping off point for out-year earnings, where our estimates are little changed.”
ATI’s fourth quarter ended on Dec. 31.
ATI (formerly Allegheny Technologies Incorporated) is an aerospace manufacturer headquartered in Dallas (TX) which produces specialty materials for the aerospace industry.
ATI is part of the aerospace supply chain, which has recently been under pressure and has not escaped the ravages of the Boeing troubles or the effects of the pandemic.
In 2020, ATI’s Albany (NY) operations temporarily closed down and was permanently shuttered in 2022. The plant produced high-quality titanium, with the bulk of production being purchased by Boeing.
The corporation is organized into two divisions: High Performance Materials & Components (HPMC) and Advanced Alloys & Solutions (AA&S).
Aerospace and Defense dominates company revenues (62% in 2024, up from 59% in 2023), with products for commercial jet engines accounting for 33% of total company sales (up from 32%). Components for commercial airframes are the next largest market for the company, with 18% of revenues.
On July 1, in a planned succession, former COO Kimberly A. Fields took over the reins as CEO from Robert S. Wetherbee, who became Executive Chairman.
Fiscal Year 2024 Results
Revenues, gross profit, and operating income were all up, across the board, by 5%, 11% and 23%, respectively. Net income and net income attributable to ATI were down (10%) and (12%). This was primarily due to the 2023 reversal of ATI’s valuation allowance of $137.4m.
ATI uses an adjusted EDITBA, which indicates a profit of $729m for 2024, up from $635m, year-over-year.
Source: ATI 2024 8-K
HPMC has the slight edge in revenues, producing 52% of all company sales ($2.279bn vs $2.084bn). It also out-earns AA&S, with better margins (20.3% vs 15.4% in 2024).
Source: ATI 2024 8-K
Although nickel-based alloys and specialty alloys decreased year-over-year by four points, it is still the driver of revenues at ATI, followed by precision forgings/castings, and then titanium products (45%, 19% and 18%, respectively).
Although the company is in negative net-debt territory ($1,174m), it is not in a precarious position.
Both current and total assets are greater than current and total liabilities, indicating an ability to meet short and long-term needs. Revenues and strong margins are expected to continue into 2025. Adjusted EBITDA for 2024 was $729m and projections for 2025 detail a guidance of between $800m – $840m. Free-cash-flow is projected to be $240m – $360m.
Given the current demands of the aviation industry supply chain, for both new aircraft, new engines, and parts for MRO of the in-service fleet, ATI appears to be well positioned for future growth and profitability.
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