14:31 TIE Titanium Metals: Boutique shop W. Quillen Securities comments that TIE a buy on weakness following decline on ATI guidance (32.38 -0.68)
Firm notes that peer Allegheny Technologies (ATI -8.2%) today cut its 2007 EPS forecast to $7.00-$7.25, vs the analyst consensus of $7.95. This was due primarily to nickel and stainless steel declines, and nickel buyers in particular tend to buy in bulk only when prices are rising, hence good times evoke even better times, and vice versa when prices slide. Titanium Metals (TIE) is a pure play on titanium, and it is firm's understanding that ATI's titanium outlook is sound. Would therefore recommend purchase of TIE on today's price decline in sympathy: believe TIE's lackluster volume increases in 1H07 were due to 1) industrial buyers postponing purchases in anticipation of falling ASPs, 2) inventory stockpiling to some extent over concerns of supply shortages, 3) A380 orders falling short of forecasts. As for the latter, firm is encouraged that British Air and Grupo Marsans recently placed orders for a total of 16 A380s, vs a total A380 backlog at the beginning of Sept of 165 firm. The first delivery is scheduled for this coming Monday, October 15, 2007. While firm estimates that these new orders would amount to only $85 million worth of titanium on average, of which TIE would supply only a portion, we are encouraged by these new orders after a period of dormancy. Firm also believes that potential weakness among non-aerospace buying may reverse itself this quarter or next, particularly given the recent ISM report not only showing continued US expansion (index at 52), but also low inventories across manufacturing sub-sectors (of all goods, not titanium). |
