ATI Downgrade: Analyst Cautious As Near-Term Catalysts 'Have Quickly Played Out'

KeyBanc Capital Markets analyst Philip Gibbs downgraded ATI Inc. ATI from Overweight to Sector Weight.

At the beginning of May, ATI reported first-quarter results, with aerospace and defense sales of $754 million, representing 66% of sales.

Gibbs has increased ATI’s 2025 estimates, citing stronger-than-expected demand in the aerospace engine and defense markets, and has also introduced projections for 2026 based on continued growth in those sectors.

While the analyst continues to view ATI as a solid long-term cyclical growth story with meaningful exposure to aerospace and defense, the analyst notes that many near-term catalysts — such as multiple expansion following the April upgrade — have “quickly played out.”

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As a result, despite the positive demand outlook, Gibbs sees a more balanced risk-reward profile in the near term.

Following the quarterly results, the analyst raised the 2025 EPS estimate to $3.07 from $2.82, aligning with ATI’s guidance of $2.87–$3.09.

Gibbs now projects EBITDA of $835 million versus prior $814 million, near the high end of the company’s $800 million–$840 million range, which remains conservative.

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The company lifted its aerospace engine growth outlook to 15%–20%-plus year-over-year from 9%-plus, reflecting a richer product mix, while maintaining its low-single-digit airframe growth view, with lower titanium volumes offset by better pricing and mix.

Concerns about Russia’s potential return to the titanium market in a de-escalation scenario were eased by ATI’s new $1 billion airframe supply deal with Airbus SE EADSY, which runs from 2026 to 2030.

Some limited pressure is expected from softer demand in China for power generation and nuclear-related sales due to trade tensions, but tariffs now appear more manageable.

Gibbs also raised 2025 free cash flow to equity to $309 million from $297 million, driven by higher EBITDA, with net capex of $240 million based on gross capex of $270 million and $30 million in customer reimbursements.

The analyst established a 2026E EPS of $3.63 and EBITDA of $937 million.

ATI Price Action: ATI shares are trading lower by 1.96% to $75.09 at publication on Tuesday.

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