Why Allegheny Technologies Incorporated's Shares Popped 40% in July

By Markets Fool.com

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Aircraft are a big part of Allegheny Technologies' demand. Image source: Getty Images.

What: Shares of Allegheny Technologies Incorporated (NYSE: ATI) jumped 39.7% in July after getting a positive Commerce Department ruling and reporting second quarter earnings.

So what: On July 12, the Commerce Department made a preliminary determination that stainless steel sheet and strip from China was getting unfair government subsidies. As a result, those products will be hit with tariffs as they come into the U.S.

The other news was second quarter earnings, which saw revenue fall 21% to $810.5 million and net loss was $18.8 million. But adjusted loss per share was $0.21, which easily topped the $0.39 per share loss expected by Wall Street analysts.

Now what: Investors are increasing speculation that Allegheny Technologies will be able to increase prices and margins as a result of tariffs on Chinese steel. That may happen slowly if tariffs hold, but right now Allegheny is losing money and sales in a highly competitive market. Watch over the next few quarters if the tariffs do start to help margins and the company's competitive position long-term. We've seen China keep the market oversupplied for years now, so betting on a recovery is still a big gamble.

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Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.