Boeing And Airbus Contracts Will Create Advanced Alloy Opportunities

Key Takeaways

• Expanded long-term contracts and manufacturing investments secure higher-margin growth and earnings stability across aerospace, defense, and new energy transition sectors.
  
• ATI's advanced materials expertise and process improvements drive efficiency, margin expansion, and greater cash flow from a diversified, resilient customer base.
  
• Heavy exposure to global trade barriers, concentrated aerospace clients, declining industrial demand, high capital needs, and threats from material substitutes pressure ATI's margins and growth outlook.

Catalysts

Produces and sells specialty materials and complex components worldwide.

• Recent long-term contract expansions with both Boeing and Airbus-including new titanium alloy sheet supply and broader product offerings-lock in higher volumes and minimums, expand ATI's share, and feature inflation pass-through and attractive pricing, directly supporting reliable, higher-margin revenue growth and a structurally improved earnings base through the decade.
  
• ATI's specialty in next-generation commercial jet engine components is powering >20% annual sales growth in this segment, and with ongoing investments to debottleneck nickel and titanium capacity, the company is positioned to capture additional volume as global air travel demand, fleet modernization, and maintenance activity accelerate, creating sustained upside for revenue and margin expansion.
  
• Global defense spending increases, including European programs requiring advanced materials, and ATI's entrenched position with key international defense and space customers (e.g., FLRAA, naval nuclear, armor plate) underpin multi-year growth in high-margin segments, supporting long-term earnings and margin resilience regardless of commercial cycle fluctuations.
  
• Discrete investments in advanced alloys production, process automation, and supply chain partnerships are already yielding step-changes in manufacturing efficiency and output, evidenced by expanding High Performance Materials & Components margins (to >24%) and stronger incremental margin capture, accelerating EBITDA and free cash flow conversion.
  
• Accelerating demand for advanced alloys in energy transition sectors-most notably commercial nuclear and gas turbines-combined with ATI's investment-led capacity expansions and unique high-value product mix, diversify the revenue base, capitalize on decarbonization trends, and improve cash generation through higher-margin growth outside core aerospace.

ATI Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming ATI's revenue will grow by 6.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 9.3% today to 11.6% in 3 years time.
• Analysts expect earnings to reach $635.6 million (and earnings per share of $4.66) by about September 2028, up from $417.5 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $511.5 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 24.8x on those 2028 earnings, up from 24.7x today. This future PE is lower than the current PE for the US Aerospace & Defense industry at 34.4x.
• Analysts expect the number of shares outstanding to decline by 3.37% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.02%, as per the Simply Wall St company report.

ATI Future Earnings Per Share Growth

Risks

• Deglobalization, international tariffs, and supply chain localization are reducing ATI's competitiveness and demand outside the U.S.; non-U.S. customers increasingly prefer local suppliers to avoid tariffs, and order rates in industrial markets remain suppressed-directly limiting ATI's overseas revenues and exposing it to cyclical drops in non-A&D segments.
  
• Sluggishness and declining demand in industrial and medical end markets (impacted by macroeconomic softness, inventory destocking, and intensified price competition, especially from China) highlight ATI's exposure outside aerospace, evidencing revenue vulnerability and compressed net margins if these segments fail to recover.
  
• The company's heavy reliance on a small base of large aerospace OEM customers (notably Airbus, Boeing, and select engine makers) heightens concentration risk; while long-term contracts provide stability, they may also cap upside from market pricing and expose ATI to significant revenue and margin volatility should key customers shift share or face disruptions.
  
• Ongoing requirement for significant capital expenditure-such as debottlenecking, new melt capacity, and facilities upgrades-creates persistent pressure on free cash flow and earnings, particularly during industry downturns, and could be exacerbated by rising interest rates or cost overruns.
  
• Industry overcapacity or breakthroughs in alternative lightweight materials (advanced composites, ceramics) threaten to erode ATI's long-term market share in titanium and nickel-based products, risking structural declines in both revenue and net margins as substitution trends advance.

Valuation

• The analysts have a consensus price target of $100.875 for ATI based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $120.0, and the most bearish reporting a price target of just $90.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $5.5 billion, earnings will come to $635.6 million, and it would be trading on a PE ratio of 24.8x, assuming you use a discount rate of 8.0%.
• Given the current share price of $74.88, the analyst price target of $100.88 is 25.8% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.