ATI Inc. (NYSE:ATI) shares are trading higher on Wednesday after KeyBanc Capital Markets analyst Philip Gibbs upgraded it from Sector Weight to Overweight, with a price forecast of $55.
The analyst says that although the FY25 earnings estimate is not revised, he anticipates that ATI’s guidance will incorporate sufficient offsetting factors to support its existing range of $2.80-$3.00.
Gibbs writes that the positive factors include an expectation of stronger and more consistent operational performance following issues in the second half of 2024 and a modest engine aftermarket growth forecast of +6% year-over-year (vs. some expectations of +15%-35% year-over-year).
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Potential negative factors include tariff effects, which the analyst says are unlikely to materialize until later in the year (if at all). ATI may also face a slowdown in airframe titanium sales (estimated -4% year-over-year in 2025).
Apart from this, the analyst says that he does not foresee the recent USW contract negotiations to have a significant impact on 2025, as there were no formal work stoppages.
Gibbs writes that he is holding off on establishing the 2026 estimates for the time being.
The 2025 earnings estimate does not currently include any profit impacts related to tariffs, as increased costs could be offset by higher sales/surcharges, adds the analyst.
For the medium term, the analyst expects ATI to gain from the ongoing multi-year increase in original equipment (OE) aerospace and defense (A&D) ramp-up, increased business with Airbus and Pratt & Whitney, and a strong aerospace aftermarket.
Further, the analyst adds that the Dallas-based company has strategically positioned itself to capitalize on greater opportunities in the defense sector for 2024-2025, including new contracts and applications.
In a separate release, the company disclosed that its employees have ratified a new six-year labor agreement with the United Steelworkers.
The company plans to release the first quarter 2025 earnings results on May 1.
Price Action: ATI shares are up 10.63% at $50.46 at the last check Wednesday.
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