What happened
Specialty materials manufacturer ATI (NYSE: ATI) delivered third-quarter results that were slightly ahead of analyst expectations, but the company trimmed guidance. Investors were more focused on what is to come, sending ATI shares down as much as 13% on Wednesday morning.
So what
ATI, formerly known as Allegheny Technologies, produces titanium alloys and other specialty materials primarily for the aerospace and energy markets. The company faced a slowdown during the pandemic as airlines cut flights and needed fewer airplanes, but it has recovered nicely over the past year as demand for both commercial aerospace and defense components have soared.
On Tuesday morning, ATI reported third-quarter adjusted earnings of $0.53 per share on revenue of $1.03 billion, just ahead of analyst expectations for $0.52 per share in earnings on sales of $942 million. The company's high performance materials segment led the way, with sales up 16% sequentially on strong demand for jet engine component.
"Our third quarter financial results reflect the benefits of ATI's strategy to focus on aerospace and defense, markets that continue to send very strong demand signals," CEO Robert S. Wetherbee said in a statement. "We continue to deliver on commitments to our customers, while accelerating cash generation. As we experience double-digit revenue growth, we're also improving working capital management and continue to prioritize disciplined capital deployment."
Now what
Though Wetherbee is optimistic about future quarters, he did say, "We recognize there are uncertainties that may impact our growth rates in the near-term." Indeed, it appears ATI is not going to grow as fast as investors had hoped in the months to come.
The company revised its full-year 2022 earnings-per-share guidance from $1.96 to $2.02, below the prior $2-to-$2.14 guide and the Street's $2.07 consensus estimate. Full-year free cash flow guidance was also lowered by about $20 million, seemingly on a pending litigation payment.
With airlines and other industrial users trying to become more fuel efficient, the specialty materials made by ATI should have a bright future as lighter, durable alternatives to steel and other traditional metals. But these transitions take time, and buyers tend not to move quickly on big-ticket purchases in times of economic uncertainty.
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
