Allegheny Technologies Incorporated (NYSE:ATI) — This company produces a wide variety of specialty metals for various industrial uses, including the aerospace industry. The aerospace market is showing solid growth, and the company has more than $4 billion in long-term agreements with its customers in this industry.
Following 4.4% sales growth in 2014, S&P Capital IQ anticipates revenue will increase 15% in 2015 and another 14% in 2016. Its analysts expect earnings to rise due to growth in the company’s key areas of focus — aerospace, chemicals and electrical energy. They forecast 2015 earnings per share (EPS) of $1.59, up from a loss of $0.33 in 2014, and $2.65 in 2016.
Positive free cash flow is expected later this year, which Capital IQ says will increase the likelihood of dividend hikes, acquisitions or share repurchases — all of which could directly benefit shareholders. Its analysts rate ATI stock a “buy” with a 12-month price target of $37.
Technically ATI stock is in an intermediate downtrend, but it appears to have formed a bottom and is now attacking its downtrend line at $32. The 50-day moving average is turning up, and on March 30, ATI stock broke through the 20-day moving average on high volume. Higher volume on up days versus down days is another positive indicator.
MACD is flat and improving, and should respond well to a break in price above the 50-day moving average, now at $31.
Buy ATI stock under $31 with a trading target of $36, the 200-day moving average, for a return of 16%-plus. Investors can buy shares as a long-term investment in the specialty metals subsector for a 12-month price objective of $46 and forward annual dividend yield of 2.4%.