US-based specialty metals producer, Allegheny Technologies Inc. (NYSE: ATI) is expected to report its fourth quarter earnings on January 26, 2011. In the last Three quarters of FY 2010 ended September 2010, Allegheny's reported EPS exceeded analysts' consensus estimate by margin of 4.30 percent for the quarter ended March 2010. For the quarter ended June 2010, the company's reported EPS missed analysts' estimates by margin of 2.70 percent, and in quarter ended September 2010, the reported EPS equaled analysts' consensus estimate of $0.05 per share.
Allegheny's products include titanium and titanium alloys, nickel-based alloys and super alloys, zirconium, hafnium and niobium, stainless and specialty steel alloys, grain-oriented electrical steel, tungsten-based materials and cutting tools, carbon alloy impression die forgings, and large grey and ductile iron castings. The company focuses on its technological and unsurpassed manufacturing capabilities to serve global end use markets with diversified and specialized product offerings. ATI operates in three segments: High Performance Metals Segment, Flat-Rolled Products Segment and Engineered Products Segment.
On November 17, 2010, the company, went into a definitive merger agreement whereby Allegheny would acquire Ladish Co. Inc. (NASDAQ: LDSH) for an aggregate fully distributed equity value of $778 million. However, on January 3, 2011, Allegheny said that the review period under Hart-Scott Rodino Antitrust improvements Act of 1976 has expired for the offer to acquire Ladish Co, satisfying one of the conditions of the agreement. The transaction is also subject to approval by Ladish shareholders and other closing conditions, and is expected to be completed in the first quarter of 2011.
Q3 earnings met analysts' consensus
For the third quarter FY 2010, Allegheny reported net income of $1 million, or $0.01 per share, on sales of $1.06 billion, compared to net income of $1.4 million, or $0.01 per share, on sales of $697.6 million in 2009. The third quarter operating profit increased $63 million, or 6 percent of sales, compared to $54 million, or 7.7 percent of sales, for the same quarter in 2009. The third quarter results benefited from $14.8 million of gross cost reduction.
ATI's main competitors within the specialty metals industry include Titanium Metals (NYSE: TIE) and Carpenter Technology (NYSE: CRS). In the last one year, Carpenter Technology reported earnings of $0.42 per share on sales of $1.32 billion, and Titanium Metals reported earnings of $0.35 per share, on sales of $823.40 million. On the other hand, ATI, reported earnings of $0.93 per share, on sales of $3.83 billion. ATI has a P/E ratio of 65.42, which is extremely high, compared to industry's P/E of 21.97. The P/S ratio of the company is at 1.57, compared to industry's P/S of 6.88.
Wall Street analysts' expects better Q4 results than Q3
For the fourth quarter ended December 31, 2010, analysts' EPS estimates range from a low of $0.21 to a high of $0.36 per share, compared to the consensus estimate of $0.30 or $0.36 earned in the year ago quarter. Analysts' revenue estimates for the fourth quarter range from a low of $1.01 billion to a high of $1.09 billion, compared to a consensus estimate of $1.05 billion or $815.70 million reported in the same quarter a year ago. For the quarter ended December 31, 2010, the consensus EPS forecast has remained constant at $0.30, for the last 60 day. However, the analysts' estimated $0.49 per share, 90 days ago.
ATI paid a quarterly cash dividend of $0.18 per share of common stock on December 30, 2010.ATI's Board of Directors approved a share repurchase program of $500 million on November 1, 2007. As of December 31, 2009, 6,837,000 shares of common stock had been purchased under this program at a cost of $339.5 million, and there were no share repurchases made under the program in FY 2009. In the last 52 weeks, the stock has been trading in the range of $39 and $61.13. In the last one year, ATI's stock has gained 31 percent to reach $60.97 on January 18, 2011. Based on the EPS estimates and key financials of ATI, I see a one year target price of $58.