Tapping into demand from the aerospace, defense and other markets, specialty steel producer ATI is generating accelerating sales growth and a spiking earnings rebound. That has ATI stock forging a new buy zone and a spot on the IBD Leaderboard.
With the highest-possible 99 Composite Rating, ATI leads the specialty steel alloys industry group.
On Aug. 4, the Pittsburgh, Pa.-based company posted year-over-year Q2 sales growth of 56%, marking a second straight quarter of acceleration.
While based on comparisons to prior-year quarters showing a loss, ATI has generated an explosive EPS growth rebound. The steel producer has now generated four straight quarters of triple-digit gains, including a 550% Q2 EPS increase.
Sales have turned around with earnings, although recent percentage gains are based on prior-year losses. In addition, the company has tougher year-over-year comparisons ahead.
For Q3, analysts expect ATI to deliver 740% earnings growth.
ATI Forges Steel To Fly, Float And Roll
Encompassing everything from jet engines and nuclear-powered submarines to military tanks and supersonics, ATI has a strong presence in materials science within the defense and aerospace industries. As noted in February 2022's investor presentation, ATI sees continued growth as a result of increasing geopolitical tensions in Asia and Europe.
Drivers of future growth include nuclear naval investments, NexGen vertical lift programs and expanding hypersonic flight capabilities. Through 2025, ATI projects 115% growth in its NextGen engine business.
ATI partners with defense contractors and other customers to deliver materials that enable their products to fly higher and faster, burn hotter, dive deeper, stand stronger and last longer. In addition to defense and aerospace, the company also works in the specialty energy, electronics, and medical fields.
The materials provider operates in the U.S., Europe and Asia in 57 locations across 17 countries. According to the company, its products have played a critical role in every new generation of aircraft in the last fifty years.
Last month, ATI forged a multiyear agreement with GKN Aerospace. Under the deal, the company will supply high-value titanium materials used in the manufacturing of commercial and military airframes. It will constitute the majority share of titanium plate and sheet products to GKN, a global tier-one aerospace supplier.
ATI Stock Tests Strength Of Recent Breakout
ATI stock gapped up in heavy volume after Aug. 4 earnings while still forming a double bottom. The stock cleared the 28.91 buy point the next day, in even heavier trade, while its relative strength line soared.
It mounted a trendline entry within the base before the gap, yielding an earlier opportunity to get on board.
While ATI stock slipped below a double-bottom entry during Monday's session, it came off the day's lows to close right at the buy point.
Look for price action to retake the 28.91 entry in heavy volume to signal renewed demand for the breakout.
Follow Matthew Galgani on Twitter at @IBD_MGalgani.
