USAP - Scary Headlines Open A Window Of Opportunity With ATI Stock

2024-06-17 17:11:15 ET

Summary

• Commercial aerospace has seen more than its share of bad press, with the latest being a report of faulty titanium components making it into Airbus and Boeing planes.
• Given how ATI sources its titanium, I see little direct risk to the company, but can't rule out that this leads to further interruptions in 2024 production schedules.
• Despite ongoing production challenges in the aerospace sector, ATI has a long runway ahead for revenue growth and margin improvement as widebody production accelerates in 2025 and 2026.
• There is significant uncertainty over what peak margins and free cash flow will look like, but those are likely still at least three years away and ATI still offers some upside now.

There has been no shortage of issues at major aircraft OEMs Airbus ( E ADSY ) or Boeing ( BA ), but those headwinds haven’t prevented ATI ( ATI ) from leveraging this upturn in aerospace and generating meaningfully better margins than in past years. With that, these shares have done alright since my last update , climbing more than 25%, though other specialty alloy rivals like Carpenter ( CRS ) and Universal Stainless & Alloy Products ( USAP ) have done even better....

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