Allegheny Technologies (ATI): A Momentum Play in Specialty Metals Amid Earnings Growth

Allegheny Technologies (NYSE: ATI) is a name worth watching in the Basic Materials sector as it continues to deliver robust earnings and outperform its peers. With a strategic focus on aerospace and defense markets, ATI has positioned itself as a leader in specialty metals—a niche with high barriers to entry and steady demand. Let's dissect the data to see why this stock is primed for momentum-driven gains.

Recent Earnings: Strong Growth Anchors Momentum

ATI's first-quarter 2025 results, released May 1, 2025, underscore its dominance in high-margin aerospace markets. Sales surged to $1.14 billion, a 10% year-over-year increase, with aerospace and defense sales jumping 23% to $754 million. This segment now accounts for 66% of total sales, reflecting ATI's deliberate pivot toward next-gen commercial jet engines and defense products.

Net income hit $97 million, up 47% year-over-year, while adjusted EPS rose to $0.72, a 50% improvement. The company also reaffirmed its 2025 financial targets, including $800M–$840M in adjusted EBITDA and $2.87–$3.09 in adjusted EPS. This clarity in guidance is a key driver of investor confidence.

Zacks Momentum Style Score: A Green Light for Bulls

ATI's Zacks Momentum Style Score of B reflects its alignment with momentum investing principles. The score factors in short-term price trends, earnings estimate revisions, and trading volume. Key highlights:
- Short-term performance: Shares rose 1.15% week-over-week and 11.39% month-over-month, outpacing its Steel-Specialty industry, which declined 2.24% in the same period.
- Earnings revisions: Over two months, analysts raised full-year earnings estimates three times, boosting the consensus from $2.91 to $3.01.
- Volume: The 20-day average trading volume of 1.8 million shares signals strong liquidity and investor interest.

ATI's YTD return of 59.27% dwarfs the S&P 500's 11.45%, highlighting its momentum.

The Zacks Rank of #2 (Buy) further supports the case for near-term outperformance. Historically, stocks with a #1 or #2 rank and Momentum Scores of A/B outperform the market over one month—a bullish sign for ATI.

Valuation: PEG Ratio Suggests Room to Grow

While ATI's PEG ratio of 1.20 is slightly above its Steel-Specialty industry average (1.18), it's still reasonable given its growth trajectory. For context:
- Peer comparison: Tronox Holdings (TROX) has a PEG of 0.00, but this reflects negative earnings expectations, not growth potential.
- Sector context: ATI's PEG is half that of the broader Basic Materials sector, which faces macroeconomic headwinds.

A PEG near 1.20 implies the stock trades at a slight premium to its earnings growth rate—a fair trade-off for a company with 29% YoY EBITDA growth and a 65% sales mix in high-margin aerospace.

Addressing Concerns: Industry Rank and Volatility Risks

Critics may point to ATI's #96 rank in the Steel-Specialty industry (out of 100) as a red flag. However, this ranking often overlooks niche strengths:
- Market focus: Unlike broader steel producers, ATI targets $754 million in aerospace sales, a segment growing at ~15% annually.
- Competitive moat: Its proprietary alloys and long-term contracts with Boeing and Lockheed Martin provide stability.

Near-term volatility is a risk, particularly if defense budgets tighten or oil prices disrupt energy-sector demand. Yet ATI's $475 million cash balance and $520 million remaining in share buybacks offer a buffer.

Investment Thesis: Buy the Momentum, but Mind the Horizon

ATI is a strategic buy for investors seeking growth in specialty metals, especially amid rising demand for electric aircraft and defense modernization. Key catalysts ahead:
1. Q2 2025 earnings: Guidance calls for $0.67–$0.73 EPS, which could be exceeded if aerospace orders accelerate.
2. Share repurchases: The $700 million buyback program has $520 million left, potentially boosting EPS.
3. 2027 targets: ATI aims for $5.2B–$5.4B in sales and $1.0B–$1.2B in EBITDA by 2027—metrics to watch for long-term conviction.

Risk-Adjusted Play: Pair a long position in ATI with a short on broader steel ETFs (e.g., SLX) to hedge against sector-wide downturns.

Final Take

Allegheny Technologies isn't just riding momentum—it's driving it. With a strong earnings narrative, attractive PEG ratio, and a Zacks Rank #2 Buy, this stock is a compelling pick for investors willing to bet on specialized industrial growth. While macro risks linger, ATI's focus on high-margin aerospace markets gives it resilience. Buy on dips below $35/share and set a 12-month price target of $42–$45, aligned with its 2025 EPS guidance.

Stay ahead of the curve—ATI's momentum isn't just a trend; it's a takeoff.