GICS Sector : Industrials
ATI Inc.manufactures and sells specialty materials and components worldwide.The company operates in two segments: High Performance Materials & Components (HPMC) and Advanced Alloys & Solutions (AA&S).
ATI reported revenue of over $1.1 billion, a 7% year-over-year increase, with adjusted EPS of $0.85, exceeding the high end of the projected range by $0.10. Adjusted EBITDA totaled $225 million, also exceeding the high end of guidance by $5 million. Both segments delivered excellent profitability, with High Performance Materials & Components segment margins above 24% and Advanced Alloys & Solutions segment above 17%. The company's strong financial performance is a testament to its operational excellence and disciplined execution, with Kim Fields stating that "operational excellence and disciplined execution are the backbone of our performance."
Publication Date: Oct -31
The High Performance Materials & Components segment delivered EBITDA margins of 24.2%, up 50 basis points sequentially and 190 basis points year-over-year. The Advanced Alloys & Solutions segment saw margins improve to 17.3%, a 290 basis point increase sequentially and a 250-point increase year-over-year. This reflects gains from ongoing transformation and efficiency efforts, demonstrating the company's ability to drive long-term value through its strategy and investments.
ATI is raising its full-year guidance across the board, with adjusted EBITDA now forecast between $848 million and $858 million, a $28 million increase at the midpoint. Adjusted free cash flow is now forecast between $330 million and $370 million, a $40 million increase at the midpoint. The company expects continued growth and strength in the jet engine market, with airframe sales expected to be up high single-digit in 2026.
With a P/E Ratio of 31.16 and an EV/EBITDA of 19.11, the market is pricing in a certain level of growth and profitability. The company's ROE of 24.8% and ROIC of 13.15% indicate strong returns on equity and invested capital. As analysts estimate next year's revenue growth at 8.1%, it remains to be seen if the company can continue to deliver on its promises and justify its current valuation.
The company's focus on aerospace and defense is paying off, with 70% of revenue now coming from these high-value markets. ATI's capabilities in differentiated materials, such as zirconium, hafnium, titanium, and nickel products, are well-positioned to drive growth in the energy market. With a stable supply chain and built stockpiles, the company is confident in its ability to meet demand and drive long-term value.
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ATI Inc.'s High Performance Materials & Components segment growth of 6.5% is driven by increasing demand for advanced materials in aerospace and defense, growth in commercial aerospace, and rising adoption of electric vehicles, which require high-performance materials. Additionally, ATI's strategic investments in research and development, and its focus on operational efficiency, have contributed to the segment's growth.
ATI Inc.'s Advanced Alloys & Solutions segment growth of 6.8% is driven by increasing demand for high-performance materials in aerospace and defense, growth in commercial aerospace, and rising adoption of electric vehicles. Additionally, ATI's strategic investments in research and development, as well as its focus on operational efficiency, have contributed to the segment's growth.
High-performance graphics processing units (GPUs) for gaming, professional visualization, and machine learning applications
Professional-grade graphics processing units (GPUs) for workstations, data science, and AI development
High-performance accelerators for machine learning, deep learning, and high-performance computing
Physically-based rendering engine for film, television, and architectural visualization
Image sharpening technology for improved image quality and detail
Low-latency technology for improved gaming performance
On-screen display technology for real-time performance monitoring and customization
The threat of substitutes for ATI Inc. is medium due to the presence of alternative graphics processing units (GPUs) from competitors like NVIDIA.
The bargaining power of customers is low due to the specialized nature of ATI's products, making it difficult for customers to switch to alternative suppliers.
The bargaining power of suppliers is medium due to the dependence on a few key suppliers for components, but ATI's large scale of operations provides some negotiating power.
The threat of new entrants is low due to the high barriers to entry in the GPU market, including significant research and development costs and the need for specialized expertise.
The intensity of rivalry is high due to the intense competition between ATI and NVIDIA, with both companies constantly innovating and improving their products to gain market share.
| Value | |
|---|---|
| Debt Weight | 61.35% |
| Debt Cost | 3.95% |
| Equity Weight | 38.65% |
| Equity Cost | 9.78% |
| WACC | 6.20% |
| Leverage | 158.75% |
Value: 4.3
Growth: 7.1
Quality: 7.9
Yield: 2.0
Momentum: 9.0
Volatility: 8.0
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Volatility: 6.3
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Growth: 7.3
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Volatility: 4.0
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Value: 3.1
Growth: 4.7
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Yield: 0.0
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Volatility: 6.0
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