Investors were pleased with the earnings news from specialty metals manufacturer Allegheny Technologies Incorporated (NYSE: ATI). They bid the stock up some 6% Tuesday, January 29 despite the fact that shipments and operating profits in 4Q2007 slipped and are expected to continue to be soft in 1Q2008.

For the year, Allegheny Technologies posted record sales of $5.45 billion, up 10%. Net income shot up 30% to a record $747 million. Cash flow increased by $121 million so that the company has more cash than debt, operating profit increased by 23%, EPS hit $7.26, and international sales topped $1.5 billion, another record. As a result, Allegheny Technologies initiated a half-billion dollar stock buy-back program and raised the dividend for the third straight year.

Overall, the picture looks good, but there are some negatives. Raw material costs continue to increase. Demand for stainless steel products was "extraordinarily weak," offset in part by stronger demand for tungsten and tungsten carbide products. Demand remains strong in the commercial aerospace and defense segments which results in strong demand for titanium based products for aircraft frames. Supply chain uncertainties with the Boeing 787 Dreamliner, however, may curtail operating profits in that segment.

Given its diverse product offerings, its expanding joint centure in China, Allegheny Technologies appears able to withstand whatever the U.S. economy will do in the coming months.

Specialty metals producer Allegheny Technologies Inc. (NYSE: ATI) is in the very enviable position of having record demand for its products despite rising prices averaging 4-39% for those same products. First off, the stock is up almost 30% for the year, opening the year at $88.45, and closing on July 13 at $114.97, up $.67. Analysts consider $125 to be a fair target, so there is still plenty of movement left in the stock. Its P/E of 16.85 is significantly below industry average, while its 6.47 EPS is very much above industry average. Return on stockholders equity is above 50%, and the company has half a billion dollars on hand in case it likes the look of other companies to acquire.

Allegheny Technologies recently posted record quarterly profits for 1Q 2007. Sales increased 32% to $1.37 billion. Net income increased a whopping 86% to $198 million, about $1.92 per share, almost double the net income of 1Q 2006. Demand for its higher priced titanium-based products has reached record levels in the aerospace and defense industries. Demand of what CEO L. Patrick Hassey terms "exotic alloys" is at a record level. ATI is building additional capacity to service this demand, which shows no signs of abating, despite significant increases in the costs of raw metal materials. ATI has instituted cost containment measures to help counteract the hike in raw material prices.

ATI consists of three main product divisions. High Performance Metals is the largest division and deals primarily with titanium related metals used in aircraft construction. Despite capacity expansion, this division is facing record backlog orders to satisfy demand. Sales in this division increased 35% to $477 million for 1Q 2007. Sales in the Flat-Rolled Products division increased 20.4% for an operating profit of $160 million, despite a noticeable decline in shipments of commodity stainless sheet metals. The Engineered Products division deals with tungsten-related products. ATI is currently expanding capacity for this division and hopes to increase production significantly by the end of 2Q 2007. ATI posted revenues in excess of $5 billion for the most recent four quarters, and expects that figure to increase as 2Q 2007 figures surpass record levels set in 1Q 2007. There does not seem to be a downside to this stock at this time.