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Allegheny Technologies slips on outlook despite strong quarter

Allegheny Technologies slumped yesterday after the Pittsburgh specialty metals producer reported an 86 percent increase in first quarter earnings but forecast comparable second quarter results.

Net income of $197.8 million, or $1.92 per diluted share, came on sales of $1.37 billion. The results, which exceeded Wall Street forecasted earnings of $1.83 per share, were buoyed by higher metals prices and strong demand from the aerospace industry and other major customers.

"Our key growth markets remain strong, and we are well positioned to benefit from these strong markets," said Chairman, President and Chief Executive Officer L. Patrick Hassey.

Despite the strong results, the markets appeared to focus on the second quarter forecast, which is based on better results from the company's high performance metals business but reduced earnings at the Allegheny Ludlum flat rolled products unit. Mr. Hassey cautioned that volatile nickel prices, a key ingredient in some of the specialty metal producer's products, could result in inventory-related charges greater than the $20.9 million recorded in the first quarter.

Allegheny Technologies shares fell $4.87 yesterday, finishing at $112.89. Even after the slide, they are up 24 percent this year.

U.S. Steel shares were dented Tuesday after the company posted better-than-expected first quarter earnings but forecast a flat second quarter. They rebounded yesterday, finishing at $104.83, up $1.79.

Allegheny Technologies first quarter results reflect pre-tax costs of $5.9 million related to a new contract for the company's Allegheny Ludlum operations. The four-year agreement was ratified in March, three months before the current contract was set to expire. It covers 3,100 members of the United Steelworkers union at plants in Western Pennsylvania, Ohio and five other states.

"We were happy to pay it to get an early agreement and a good agreement with the United Steelworkers," Mr. Hassey told analysts during a conference call.

He also forecast 25 percent growth in the company's titanium business this year and said that, given demand from the aerospace industry, the business could grow at a comparable clip for several years.

In the year-ago quarter, Allegheny earned $106.5 million, or $1.04 per diluted share, on sales of $1.04 billion.